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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER 0-22387
DCB FINANCIAL CORP
(Exact name of registrant as specified in its charter)
OHIO 31-1469837
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
110 Riverbend Ave., Lewis Center, Ohio 43035
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (740) 657-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Shares, No
par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
At June 30, 2004, the aggregate market value of the voting and non-voting common
equity held by nonaffiliates of the registrant, based on a common share price of
$23.45 per share (such price being the average of the bid and asked prices on
such date) was $85,187,894.
At March 1, 2005, the registrant had 3,934,760 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II of Form 10-K - Portions of the Annual Report to Shareholders for
the year ended December 31, 2004.
Part III of Form 10-K - Portions of the definitive Proxy Statement for the 2005
Annual Meeting of Shareholders of DCB Financial Corp.
1
PART I
ITEM 1 DESCRIPTION OF BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
DCB Financial Corp ("DCB" or the "Corporation") is a financial
services holding company headquartered in Lewis Center, Ohio. The
Corporation has one wholly-owned subsidiary bank, the Delaware County
Bank and Trust Company (the "Bank").
The Corporation was incorporated under the laws of the State of Ohio
in 1997, at the direction of management of the Bank for the purpose of
becoming a bank holding company by acquiring all outstanding shares of
the Bank. The Corporation acquired all such shares of the Bank after
an interim bank merger, which transaction was consummated on March 14,
1997. The Bank is a commercial bank, chartered under the laws of the
State of Ohio, and was organized in 1950.
(B) NARRATIVE DESCRIPTION OF BUSINESS
The Bank provides customary retail and commercial banking services to
its customers, including checking and savings accounts, time deposits,
IRAs, safe deposit facilities, personal loans, commercial loans, real
estate mortgage loans, installment loans, trust, and other wealth
management services. The Bank also provides cash management, bond
registrar and paying agent services. Through its own computer
department, the Bank provides data processing and other bank
operational services to other financial institutions; however, such
services are not a significant part of operations or revenue.
The Corporation, through the Bank, grants residential real estate,
commercial real estate, consumer and commercial loans to customers
located primarily in Delaware, Franklin, Licking, Morrow, Marion and
Union Counties, Ohio. General economic conditions in the Corporation's
market area have been sound, including unemployment statistics, which
have generally remained stable. Real estate values, especially in the
Bank's core geographic area, have been stable to rising for the last
five years.
The Bank is not significantly affected by seasonal activity or large
deposits of any individual depositor. At year-end 2004, deposits of
public funds (funds of governmental agencies and municipalities) were
19.0% of total deposits. This amount can fluctuate, but generally not
by a material amount. No material industry or group concentrations
exist in the loan portfolio.
Certain risks are involved in granting loans, primarily related to the
borrowers' ability and willingness to repay the debt. Before the Bank
extends a new loan to a customer, these risks are assessed through a
review of the borrower's repayment capacity, past and current credit
history, the collateral being used to secure the transaction in case
the customer does not repay the debt, the borrower's character and
other factors. Once the decision has been made to extend credit, the
Bank's independent loan review function and credit officer monitor
these factors throughout the life of the loan. All credit
relationships of $575,000 or more are reviewed annually, as are 30% of
credit relationships from $250,000 to $575,000, 20% of credit
relationships from $100,000 to $250,000 (excluding residential
mortgages), and 10% of residential mortgages from $100,000 to
$250,000. Loan review performs a limited scope review of a minimum of
30 percent of all new loans booked. In addition, any loan identified
as a problem credit by management or that during the loan review is
assigned to the Bank's loan "watch list," is subject to ongoing
monitoring by the loan review and the Bank's credit quality committee
to ensure appropriate action is taken if deterioration occurs.
Commercial, industrial and agricultural loans are primarily variable
rate and include operating lines of credit and term loans made to
small businesses primarily based on their ability to repay the loan
from the business's cash flow. Such loans are typically secured by
business assets such as
2
equipment and inventory and, occasionally, by the business owner's
principal residence. When the borrower is not an individual, the Bank
generally obtains the personal guarantee of the business owner. As
compared to consumer lending, which includes single-family residence,
personal installment loans and automobile loans, commercial lending
entails significant additional risks. These loans typically involve
larger loan balances and are generally dependent on the business's
cash flow and, thus, may be subject to adverse conditions in the
general economy or in a specific industry. Management reviews the
borrower's cash flows when deciding whether to grant the credit to
evaluate whether estimated future cash flows will be adequate to
service principal and interest of the new obligation in addition to
existing obligations.
Commercial real estate and farmland loans are primarily secured by
borrower-occupied business real estate and are dependent on the
ability of the related business to generate adequate cash flow to
service the debt. Such loans primarily carry adjustable interest
rates. Commercial real estate loans are generally originated with a
loan-to-value ratio of 80% or less. Management performs much the same
analysis when deciding whether to grant a commercial real estate loan
as a commercial loan.
Residential real estate loans and home equity lines of credit carry
primarily adjustable rates, although fixed-rate loans are originated
and are secured by the borrower's residence. Such loans are made based
on the borrower's ability to repay the debt from employment and other
income. Management assesses the borrower's ability to repay the debt
through a review of credit history and ratings, verification of
employment and other income, review of debt-to-income ratios and other
measures of repayment ability. The Bank generally makes these loans in
amounts of 80% or less of the value of collateral. An appraisal is
obtained from a qualified real estate appraiser for substantially all
loans secured by real estate.
Due to the high level of growth in the Corporation's market area,
construction lending has become a significant part of the
Corporation's overall lending strategy. Construction loans are secured
by residential and business real estate, generally occupied by the
borrower on completion. The Bank's construction lending program is
established in a manner to minimize risk of this type of lending by
not making a significant amount of loans on speculative projects.
While not contractually required to do so, the Bank usually makes the
permanent loan at the end of the construction phase. Construction
loans also are generally made in amounts of 80% or less of the value
of collateral.
Consumer installment loans to individuals include loans secured by
automobiles and other consumer assets, including second mortgages on
personal residences. Consumer loans for the purchase of new
automobiles generally do not exceed 85% of the purchase price of the
car. Loans for used cars generally do not exceed average wholesale or
trade-in value as stipulated in a recent auto industry used car price
guide. Credit card and overdraft protection loans are unsecured
personal lines of credit to individuals of demonstrated good credit
character with reasonably assured sources of income and satisfactory
credit histories. Consumer loans generally involve more risk than
residential mortgage loans because of the type and nature of
collateral and, in certain types of consumer loans, the absence of
collateral. Since these loans are generally repaid from ordinary
income of an individual or family unit, repayment may be adversely
affected by job loss, divorce, ill health or by general decline in
economic conditions. The Bank assesses the borrower's ability to make
repayment through a review of credit history, credit ratings,
debt-to-income ratios and other measures of repayment ability.
3
(B) NARRATIVE DESCRIPTION OF BUSINESS (CONTINUED)
The Bank also has a small leasing portfolio, which mainly consists of
retail auto leases. Effective 2004, the Bank no longer offered retail
auto leasing and expects this portfolio to decline as losses mature.
The vehicle lease portfolio includes new and late model automobiles
and light trucks with original terms from 12 to 60 months. The Bank
also had provided lease financing to businesses for commercial
equipment. This line of business represents a very small portion of
the overall leasing portfolio. The Bank's may continue to offer leases
on new and used equipment with flexible terms, though generally the
term of a given lease is limited to some extent by the type of
equipment and its useful life. Average lease terms for commercial
equipment leases typically range from 3 to 8 years.
EMPLOYEES
At December 31, 2004, the Bank employed 216 employees, 175 of whom
were full-time. The Bank offers a number of employee benefits such as
health, dental and life insurance, as well as education assistance for
qualified employees. A 401(k) retirement plan is also available for
eligible employees. No employee is represented by a union or
collective bargaining group. Management considers its employee
relations to be good. All of the Corporation's employees are also
employed by the Bank.
COMPETITION
The Bank operates in a highly competitive industry due to statewide
and interstate branching by banks, savings and loan associations and
credit unions. In its primary market area of Delaware County, Ohio and
surrounding counties, the Bank competes for new deposit dollars and
loans with several financial service companies, including large
regional and smaller community banks, as well as savings and loan
associations, credit unions, finance companies, insurance companies,
brokerage firms and investment companies. According to the most recent
market data, there are approximately fifteen other deposit taking and
lending institutions competing in the Bank's market. In addition,
according to the market data, the Bank currently ranks first in market
share with approximately 36% of the market. The ability to generate
earnings is impacted in part by competitive pricing on loans and
deposits, and by changes in the rates on various U.S. Treasury, U. S.
Government Agency and State and political subdivision issues which
comprise a significant portion of the Bank's investment portfolio, and
which rates are used as indices on various loan products. The Bank is
competitive with interest rates and loan fees that it charges, in
pricing and variety of accounts it offers to the depositor. The
dominant pricing mechanism on loans is the Prime interest rate as
published in the Wall Street Journal. The interest spread over Prime
depends on the overall account relationship and the creditworthiness
of the borrower. Deposit rates are reviewed weekly by management and
are normally discussed by the Asset/Liability Committee on a monthly
basis. The Bank's primary objective in setting deposit rates is to
remain competitive in the market area, develop funding opportunities
while earning an adequate interest rate margin.
SUPERVISION AND REGULATION
The business in which the Bank and its subsidiaries are engaged is
subject to extensive supervision, regulation and examination by
various bank regulatory authorities and other governmental agencies.
The Bank is subject to supervision, regulation and periodic
examination by the State of Ohio Superintendent of Financial
Institutions and the Federal Deposit Insurance Corporation ("FDIC").
The supervision, regulation and examination to which The Bank and its
subsidiaries are subject are intended primarily for the protection of
depositors and the deposit insurance funds that insure the deposits of
banks, rather than for the protection of security holders.
4
Earnings of the Bank are affected by state and federal laws and
regulations, and by policies of various regulatory authorities. These
policies include, for example, statutory maximum lending rates,
requirements on maintenance of reserves against deposits, domestic
monetary policies of the Board of Governors of the Federal Reserve
System, United States fiscal policy, international currency
regulations and monetary policies, certain restrictions on banks'
relationships with many phases of the securities business and capital
adequacy and liquidity restraints. As a financial holding company, the
Corporation is subject to supervision, regulation and periodic
examination by the Federal Reserve Board, and is subject to the rules
of the SEC.
LIABILITY FOR BANKING SUBSIDIARIES
Under Federal Reserve Board policy, a bank holding company is expected
to act as a source of financial and managerial strength for each of
its subsidiary banks and to commit resources to their support. This
support may be required at times when the bank holding company may not
have the resources to provide it. Similarly, under the cross-guarantee
provisions of the Federal Deposit Insurance Act, the FDIC can hold any
FDIC-insured depository institution liable for any loss suffered or
anticipated by the FDIC in connection with (1) the "default" of a
commonly controlled FDIC-insured depository institution; or (2) any
assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution "in danger of default."
FDICIA
The Federal Deposit Insurance Corporation Act of 1991 (FDICIA), and
the regulations promulgated under FDICIA, among other things,
established five capital categories for insured depository
institutions-well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized, and requires federal bank regulatory agencies to
implement systems for "prompt corrective action" for insured
depository institutions that do not meet minimum capital requirements
based on these categories. Unless a bank is well capitalized, it is
subject to restrictions on its ability to offer brokered deposits and
on certain other aspects of its operations. As of December 31, 2004,
the Corporation and the Bank were both considered well capitalized
based on the guidelines implemented by the Federal Reserve and FDIC.
FINANCIAL MODERNIZATION
The Gramm-Leach-Bliley Act was signed into law on November 12, 1999
and became effective March 11, 2000. It permits bank holding companies
to become financial holding companies and thereby affiliate with
securities firms and insurance companies and engage in other
activities that are financial in nature. A bank holding company may
become a financial holding company if each of its subsidiary banks is
well capitalized under regulatory prompt corrective action provisions,
is well managed, and has at least a satisfactory rating under the
Community Reinvestment Act (CRA) by filing a declaration that the bank
holding company wishes to become a financial holding company. No
regulatory approval will be required for a financial holding company
to acquire a company, other than a bank or savings association,
engaged in activities that are financial in nature or incidental to
activities that are financial in nature, as determined by the Federal
Reserve Board.
The Gramm-Leach-Bliley Act defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual
funds and investment companies; insurance underwriting and agency;
merchant banking activities; and activities that the Board has
determined to be closely related to banking. Subsidiary banks of a
financial holding company must continue to be well capitalized and
well managed in order to continue to engage in activities that are
financial in nature without regulatory actions or restrictions, which
could include divestiture of the financial in nature subsidiary or
subsidiaries. In addition, a financial holding company or a bank may
not acquire a company that is engaged in activities that are financial
in
5
nature unless each of the subsidiary banks of the financial holding
company or the bank has CRA rating of satisfactory or better.
(C) AVAILABLE INFORMATION
The Company maintains an Internet web-site at the following internet
address: http://www.dcbfinancialcorp.com. The Company makes available,
free of charge through its internet address, copies of its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and any amendments to these reports as soon as reasonably
practicable after such materials have been filed with or furnished to
the SEC. Copies of these documents may also be obtained, either in
electronic or paper form, by contacting Donald R. Blackburn, Vice
President of Customer Relations at 740-657-7000.
I DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
The information required by this item can be found on Pages 12-14 of
the Company's Annual Report to Shareholders. Such information is
incorporated herein by reference.
6
II INVESTMENT PORTFOLIO
The following table sets forth the carrying amount of securities at
December 31, 2004, 2003 and 2002.
(In thousands) 2004 2003 2002
-------------- ------- -------- -------
AVAILABLE FOR SALE
U.S. government agencies $26,787 $ 38,597 $29,995
States and political subdivisions 19,710 21,076 14,425
Corporate bonds 8,073 8,215 247
Mortgage-backed and related securities 41,470 38,201 49,448
------- -------- -------
Total debt securities 96,040 106,089 94,115
Other securities 2,939 2,458 2,362
------- -------- -------
$98,979 $108,547 $96,477
======= ======== =======
The following table sets forth information regarding scheduled maturities,
fair value and weighted average yields of the Corporation's debt securities
at December 31, 2004. The weighted average yield has been computed using
the historical amortized cost for securities available for sale. The
weighted average yield on tax-exempt obligations is computed on a taxable
equivalent basis based on the Corporation's marginal federal income tax
rate of 34%.
ONE FIVE
ONE THROUGH THROUGH AFTER
YEAR FIVE TEN TEN FAIR VALUE
(In thousands) OR LESS YEARS YEARS YEARS TOTAL
-------------- ------- ------- ------- ------- ----------
AVAILABLE FOR SALE
U.S. government agencies $2,027 $11,812 $ 9,886 $ 3,062 $26,787
States and political
subdivisions 132 2,233 3,169 14,176 19,710
Corporate bonds 132 -- -- 7,941 8,073
Mortgage-backed and
related securities -- 7,352 6,533 27,585 41,470
------ ------- ------- ------- -------
$2,291 $21,397 $19,588 $52,764 $96,040
====== ======= ======= ======= =======
Weighted average yield 3.358% 3.871% 4.706% 3.642% 3.789%
====== ======= ======= ======= =======
7
III LOAN PORTFOLIO
TYPES OF LOANS
The amounts of gross loans outstanding at December 31, 2004, 2003, 2002,
2001, and 2000 are shown in the following table.
(In thousands) 2004 2003 2002 2001 2000
-------------- -------- -------- -------- -------- --------
Commercial and industrial $ 49,184 $ 51,709 $ 45,543 $ 52,534 $ 48,262
Commercial real estate 175,796 156,836 144,646 124,537 101,891
Residential real estate and
home equity 170,010 117,098 87,548 88,797 84,987
Real estate construction 34,199 30,120 37,603 34,212 32,493
Consumer and credit card 51,844 44,467 48,409 52,993 51,107
Lease financing 1,405 3,932 6,412 9,520 12,278
-------- -------- -------- -------- --------
$482,438 $404,162 $370,161 $362,593 $331,018
======== ======== ======== ======== ========
8
III LOAN PORTFOLIO (CONTINUED)
RISK ELEMENTS
NONACCRUAL AND PAST DUE LOANS
The following table summarizes nonaccrual loans and accruing
loans past due greater than 90 days or more at December 31, 2004,
2003, 2002, 2001, and 2000.
(In thousands) 2004 2003 2002 2001 2000
-------------- ------ ------ ------ ------ ------
Nonaccrual loans $1,879 $1,614 $3,387 $3,390 $1,278
Accruing loans past due
90 days or more $1,544 $1,252 $ 187 $ 200 $ 205
The policy for placing loans on nonaccrual status is to cease
accruing interest on loans when management believes that
collection of interest is doubtful, when loans are past due as to
principal and interest 90 days or more, except that in certain
circumstances interest accruals are continued on loans deemed by
management to be fully collectible. In such cases, loans are
individually evaluated in order to determine whether to continue
income recognition after 90 days beyond the due dates. When loans
are placed on nonaccrual, any accrued interest is charged against
interest income.
The additional amount of interest income that would have been
recorded on nonaccrual loans, had they been current, totaled
$128, $163, and $259 for the years ended December 31, 2004, 2003,
and 2002, respectively.
POTENTIAL PROBLEM LOANS
In addition to the loans noted above, management performs a
quarterly analysis of impaired loans. A business loan is
classified as impaired when full payment under the loan terms is
not expected. Impairment is evaluated in total for smaller
balance loans or loans of a similar nature such as residential
mortgage, consumer and credit card loans, and on an individual
basis for other loans. There were no impaired loans not included
in nonaccrual, past due, or restructured loans at December 31,
2004.
LOAN CONCENTRATIONS
At year-end 2004, there were no concentrations of loans greater
than 10% of total loans that are not otherwise disclosed as a
category of loans in Item III above.
OTHER INTEREST-BEARING ASSETS
At year-end 2004, there were no other interest-bearing assets required
to be disclosed under Item III if such assets were loans.
9
IV SUMMARY OF LOAN LOSS EXPERIENCE
ANALYSIS OF THE ALLOWANCE FOR LOAN AND LEASE LOSSES
The following table sets forth the activity in the Corporation's
allowance for loan and lease losses for the years ended December 31,
2004, 2003, 2002, 2001, and 2000.
(In thousands) 2004 2003 2002 2001 2000
- ----------------------------- ------- ------- ------- ------ ------
Balance at beginning of year $ 4,331 $ 4,094 $ 3,596 $3,334 $2,793
Loans charged off:
Commercial (628) (654) (1,989) (278) (115)
Commercial real estate (102) (60) (73) -- --
Residential real estate
and home equity (60) -- (1) -- --
Real estate construction -- -- -- -- --
Consumer and credit card (524) (631) (513) (487) (391)
Lease financing (71) -- (74) -- --
-------- ------- -------- ------ ------
Total loans charged off (1,385) (1,345) (2,650) (765) (506)
-------- ------- ------- ------ ------
Loan recoveries:
Commercial 21 50 91 28 18
Commercial real estate -- -- -- -- --
Residential real estate
and home equity -- -- -- -- --
Consumer and credit card 154 114 102 126 118
Lease financing 1 -- 5 1 3
------- ------- ------- ------ ------
Total loan recoveries 176 164 198 155 139
------- ------- ------- ------ ------
Net loans charged off (1,209) (1,181) (2,452) (610) (367)
Provision for loan losses 1,696 1,418 2,950 872 908
------- ------- ------- ------ ------
Balance at end of year $ 4,818 $ 4,331 $ 4,094 $3,596 $3,334
======= ======= ======= ====== ======
Ratio of net charge-offs to
average loans outstanding 0.28% 0.31% 0.66% 0.18% 0.12%
======= ======= ======= ====== ======
ALLOCATION OF THE ALLOWANCE FOR LOAN AND LEASE LOSSES
The following schedule is a breakdown of the allowance for loan losses
allocated by type of loan and related ratios. While management's
periodic analysis of the adequacy of allowance for loan losses may
allocate portions of the allowance for specific problem-loan
situations, the entire allowance is available for any loan charge-off
that occur.
10
(In thousands)
Percentage of Percentage of Percentage of
Loans in Each Loans in Each Loans in Each
Allowance Category to Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans Amount Total Loans
--------- ------------- --------- ------------- --------- -------------
December 31, 2004 December 31, 2003 December 31, 2002
------------------- ------------------- -------------------
Commercial and industrial $3,240 10.18% $2,345 12.77% $2,120 12.30%
Commercial real estate 225 36.37 698 38.92 891 39.08
Residential real estate
and home equity 245 35.35 318 28.92 66 23.65
Real estate construction -- 7.08 -- 7.44 20 10.16
Consumer and credit card 1,074 10.73 970 10.98 706 13.08
Lease financing 34 .29 -- .97 55 1.73
Unallocated -- -- -- -- 236 --
------ ------ ------ ------ ------ ------
Total $4,818 100.00% $4,331 100.00% $4,094 100.00%
====== ====== ====== ====== ====== ======
December 31, 2001 December 31, 2000
------------------- -------------------
Commercial and industrial $1,765 14.49% $1,247 14.61%
Commercial real estate 94 34.35 174 30.73
Residential real estate
and home equity 116 24.49 73 25.89
Real estate construction 57 9.44 24 9.80
Installment and credit card 799 14.62 691 15.73
Lease financing 68 2.63 76 3.23
Unallocated 697 -- 1,049 --
------ ------ ------ ------
Total $3,596 100.00% $3,334 100.00%
====== ====== ====== ======
11
V DEPOSITS
SCHEDULE OF AVERAGE DEPOSIT AMOUNTS AND RATES
1 Average balance of noninterest-bearing demand deposits totaled
$64,838, $76,430, and $73,213, for the years ended December 31, 2004,
2003 and 2002. Additional detail regarding the make-up of the
Corporations' average deposit balances and related interest expense
can be found on page 12 of the attached Annual Report to Shareholders.
MATURITY ANALYSIS OF TIME DEPOSITS GREATER THAN $100,000
The following is a schedule of maturities of time certificates of
deposit in amounts of $100,000 or more as of December 31, 2004.
(In thousands)
--------------
Three months or less $18,850
Over three through six months 26,984
Over six through twelve months 3,887
Over twelve months 18,097
-------
Total $67,818
=======
VI RETURN ON EQUITY AND ASSETS
Refer to Page 3 of the attached Annual Report to Shareholders.
VII SHORT-TERM BORROWINGS
Average outstanding balances of short-term borrowings for the years ending
December 31, 2004, 2003 and 2002 were less than 30% of shareholders' equity
at such dates.
12
ITEM 2 PROPERTIES
The Bank owns and operates its main office at 110 Riverbend Avenue, Lewis
Center, Ohio 43035. The Bank also operates 15 branches and 4 other properties
that are owned or leased as noted below:
1. Downtown Delaware Branch Office, 41 N. Sandusky St., Delaware, Ohio 43015
(leased)
2. William Street Drive-Thru Office, 33 W. William St., Delaware, Ohio 43015
(owned)
3. Delaware Center Branch Office, 199 S. Sandusky Street, Delaware, Ohio 43015
(owned)
4. Galena Branch Office, 10 Park Street, Galena, Ohio 43021 (owned)
5. Ostrander Branch Office, 10 West North Street, Ostrander, Ohio 43061
(owned)
6. Green Meadows Branch Office, 9201 Columbus Pike, Lewis Center, Ohio 43035
(own bldg., lease land)
7. Ashley Branch Office, 2 West High Street, Ashley, Ohio 43003 (owned)
8. Buehler's Central Office, 800 West Central Avenue, Delaware, Ohio 43015
(leased)
9. Marysville Downtown Office, 108 South Main Street, Marysville, Ohio 43040
(leased)
10. Marysville Plaza Office, 1169 West Fifth Street, Marysville, Ohio 43040
(leased)
11. Sunbury Office, 75 S. Miller Dr., Sunbury, Ohio 43074 (owned)
12. Highland Lakes Office, 6156 Highland Lakes Avenue, Westerville, Ohio 43085
(leased)
13. Sawmill Parkway Office, 10149 Brewster Lane, Powell, Ohio 43065 (leased)
14. Avery Road Office, 6820 Perimeter Loop Road, Dublin, Ohio 43017 (leased)
15. Willowbrook Branch Office, 100 Willowbrook Way South, Delaware, Ohio 43015
(leased)
16. ATM Express Bank, 554 W. Central Ave., Delaware, Ohio 43015 (leased)
17. ATM Express Bank, Ohio Wesleyan University, Delaware, Ohio 43015 (leased)
18. ATM Express Bank, 8208 Marysville Road West, Ostrander, Ohio 43061 (leased)
19. ATM Express Bank, 1123 Columbus Pike, Delaware, Ohio 43015 (leased)
20. ATM Express Bank, 707 W. Cherry Street, Sunbury, Ohio 43074 (leased)
Management considers its physical properties to be in good operating condition
and suitable for the purposes for which they are being used. All the properties
owned by the Bank are unencumbered by any mortgage or security interest and are,
in management's opinion, adequately insured.
ITEM 3 LEGAL PROCEEDINGS
There is no pending litigation 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 subsidiaries 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 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders in the fourth
quarter of 2004.
13
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Common Stock and Shareholder
Matters." Such information is incorporated herein by reference. DCB did not
purchase any of its common shares in the fourth quarter of 2004.
The Bank acts as transfer agent for the Corporation's common stock.
ITEM 6 SELECTED FINANCIAL DATA
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Selected Consolidated
Financial Information and Other Data." Such information is incorporated herein
by reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Such information is
incorporated herein by reference.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Asset and Liability
Management and Market Risk." Such information is incorporated herein by
reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth beginning on Page 18 of the
Company's Annual Report to Shareholders. Such information is incorporated herein
by reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Disclosures required under this Item were previously made pursuant to a report
on Form 8-K filed with the SEC on March 21, 2003.
ITEM 9A CONTROLS AND PROCEDURES
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Based on this evaluation, our principal executive
officer and our principal financial officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this annual report.
14
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
RIDER 9A
Management's annual report on internal control over financial reporting and the
related attestation report of Grant Thornton LLP, the Company's independent
registered public accounting firm, are not provided as part of this annual
report on Form 10-K. In reliance upon a 45 day extension granted pursuant to an
exemptive order issued by the Securities and Exchange Commission on November 30,
2004, management of the Company intends to submit these items as an amendment to
this report on Form 10-K not later than April 29, 2005.
ITEM 9B OTHER INFORMATION
None
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth in the Company's Proxy
Statement to Shareholders in connection with its 2005 Annual Meeting, under the
sections captioned "Election of Directors and Information with Respect to
Directors and Officers," and "Section 16(A) Beneficial Ownership Reporting
Compliance." Such information is incorporated herein by reference.
The Company's Board of Directors has adopted a Code of Ethics and Business
Conduct that applies to all of its directors, officers, and employees, including
its principal executive, principal financial, and principal accounting officers.
A copy of the code of ethics will be provided, at no cost, upon written request
to the attention of Mr. Donald R. Blackburn, Vice President and Secretary, at
the Company's main office, 110 Riverbend Avenue Lewis Center, Ohio. In addition,
a copy of the Code of Ethics and Business Conduct is posted on our website at
http: //www.dcbfinancialcorp.com. In the event we make any amendment to, or
grant any waiver of, a provision of the Code of Ethics and Business Conduct that
applies to the principal executive officer, a principal financial officer,
principal accounting officer, or controller, or persons performing similar
functions that require disclosure under applicable SEC rules, we intend to
disclose such amendment or waiver, the reasons for it, and the nature of any
waiver, the name of the person to whom it was granted, and the date, on our
internet website.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this item is set forth in the Company's Proxy
Statement to Shareholders in connection with its 2005 Annual Meeting, under the
section captioned "Executive Compensation and Other Information" and "Committees
and Compensation of the Board of Directors." Such information is incorporated
herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information about beneficial ownership of DCB common shares required by this
item is set forth in the Company's Proxy Statement to Shareholders in connection
with its 2005 annual meeting, under the section captioned "Security Ownership of
Certain Beneficial Owners and Management." Such information is incorporated
herein by reference.
15
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
Number of securities to be remaining available for
issued upon exercise of Weighted-average exercise future issuance under
outstanding options, price of outstanding equity compensation plans
warrants and rights options, warrants and (excluding securities
rights reflected in column (a))
-------------------------- ------------------------- -------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders 15,105 $23.40 284,895
Equity compensation plan not
approved by security holders 0 0 0
------ ------ -------
Total 15,105 $23.40 284,895
====== ====== =======
On May 20, 2004 the Company's shareholders approved the DCB Financial Corp 2004
Long-Term Sock Incentive Plan. This plan authorizes the issuance of up to
300,000 DCB common shares upon exercise of stock options awarded under the plan
and in the form of restricted stock and stock awards. Beginning in June 2005,
the Company intends to expense these options under the methodology set forth in
FAS 123. Options are granted for a maximum of ten years. The options vest at a
rate of 20% annual over five years, assuming credited service by the designated
employee.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth in the Company's Proxy Statement
to Shareholders in connection with its 2005 Annual Meeting, under the section
captioned "Certain Relationships and Related Transactions." Such information is
incorporated herein by reference.
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this item is set forth in the Company's Proxy Statement
to Shareholders in connection with its 2005 Annual Meeting under the section
captioned "Information Concerning Independent Registered Public Accountants",
and such information is incorporated herein by reference.
16
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF FORM 10-K
1 The following consolidated financial statements appear in the
2004 Annual Report to Shareholders and are incorporated herein by
reference.
Report of Independent Registered Public Accounting Firm Page 46
Consolidated Balance Sheets Page 17
Consolidated Statements of Income Page 18
Consolidated Statement of Comprehensive Income Page 19
Consolidated Statements of Changes in Shareholders' Equity Page 20
Consolidated Statements of Cash Flows Page 21
Notes to Consolidated Financial Statements Pages 23
2 Exhibits
3.1 Articles of Incorporation of DCB Financial Corp
(incorporated by reference to Registrant's Form S-4, File
No. 333-15579, effective January 10, 1997)
3.2 Code of Regulations of DCB Financial Corp (incorporated by
reference to Registrant's Form S-4, File No. 333-15579,
effective January 10, 1997)
10.1 Resignation, Release, and Post-Employment Covenants
Agreement by and between DCB Financial Corp., its
wholly-owned subsidiary The Delaware County Bank and Trust
Company, and Larry D. Coburn (incorporated by reference to
Registrant's report on Form 8-K, filed with the Commission
on November 21, 2002)
10.2 Employment agreement with Mr. Whitney (incorporated by
reference to Registrant's Form 10-K, File No. 0-22387,
effective March 25, 1998)
10.3 Employment agreement with Mr. Bernon (incorporated by
reference to Registrant's Form 10-K, File No. 0-22387,
effective March 27, 2000)
10.4 Employment agreement by and between DCB Financial Corp,
its wholly-owned subsidiary The Delaware County Bank and
Trust Company, and Jeffrey Benton (incorporated by
reference to Registrant's Form 8-K, File No. 0-22387,
effective March 7, 2005).
10.5 DCB Financial Corp 2004 Long-Term Stock Incentive Plan
(incorporated by reference to Appendix D to our Proxy
Statement, as filed with the SEC on Schedule 14A on April
14, 2004)
11 Statement Regarding Computation of Per Share Earnings
13 Annual Report to Shareholders
21 Subsidiaries of DCB Financial Corp
23.1 Consent of Independent Registered Public Accounting Firm
23.2 Consent of Independent Registered Public Accounting Firm
31.1 Rule 13a-14 (a) Certifications
31.2 Rule 13a-14 (a) Certifications
32.1 Section 1350 Certifications
32.2 Section 1350 Certifications
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 16, 2005 DCB FINANCIAL CORP
By: /s/ JEFFREY BENTON
------------------------------------
Jeffrey Benton, President & CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Dated: March 16, 2005
Signatures Title
---------- -----
/s/ JEFFREY BENTON President (Principal Executive Officer),
- ------------------------------------- CEO and Director
Jeffrey Benton
/s/ JOHN A. USTASZEWSKI Vice President and Chief Financial
- ------------------------------------- Officer (Principal Financial Officer)
John A. Ustaszewski
/s/ G. WILLIAM PARKER Director, Chairman of the Board
- -------------------------------------
G. William Parker
/s/ JEROME J. HARMEYER Director
- -------------------------------------
Jerome J. Harmeyer
/s/ WILLIAM R. OBERFIELD Director
- -------------------------------------
William R. Oberfield
/s/ EDWARD A. POWERS Director
- -------------------------------------
Edward A. Powers
/s/ GARY M. SKINNER Director
- -------------------------------------
Gary M. Skinner
18
/s/ TERRY M. KRAMER Director
- -------------------------------------
Terry M. Kramer
/s/ VICKI J. LEWIS Director
- -------------------------------------
Vicki J. Lewis
/s/ ADAM STEVENSON Director
- -------------------------------------
Adam Stevenson
/s/ DONALD J. WOLF Director
- ------------------
Donald J. Wolf
19
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
3.1 Amended Articles of Incorporation of DCB Financial Corp (incorporated
by reference to Registrant's Form S-4, File No. 333-15579, effective
January 10, 1997)
3.2 Code of Regulations of DCB Financial Corp (incorporated by reference
to Registrant's Form S-4, File No. 333-15579, effective January 10,
1997)
10.1 Resignation, Release, and Post-Employment Covenants Agreement by and
between DCB Financial Corp, its wholly-owned subsidiary The Delaware
County Bank and Trust Company, and Larry D. Coburn (incorporated by
reference to Registrant's report on Form 8-K, filed with the
Commission on November 21, 2002)
10.2 Employment agreement with Mr. Whitney (incorporated by reference to
Registrant's 1997 Form 10-K, File No. 0-22387, effective March 25,
1998)
10.3 Employment agreement with Mr. Bernon (incorporated by reference to
Registrant's 1997 Form 10-K, File No. 0-22387, effective March 27,
2000)
10.4 Employment agreement by and between DCB Financial Corp, its
wholly-owned subsidiary The Delaware County Bank and Trust Company,
and Jeffrey Benton (incorporated by reference to Registrant's Form
8-K, File No. 0-22387, effective March 7, 2005).
10.5 DCB Financial Corp 2004 Long-Term Stock Incentive Plan (incorporated
by reference to Appendix D to our Proxy Statement, as filed with the
SEC on Schedule 14A on April 14, 2004)
11 Statement Regarding Computation of Per Share Earnings
13 Annual Report to Shareholders
21 Subsidiaries of DCB Financial Corp
23.1 Consent of Independent Registered Public Accounting Firm
23.2 Consent of Independent Registered Accounting Firm
31.1 Rule 13a-14 (a) Certifications
31.2 Rule 13a-14 (a) Certifications
32.1 Section 1350 Certifications
32.2 Section 1350 Certifications
20