EX-99 2 d391912dex99.htm RESULTS OF OPERATIONS DATED JULY 30, 2012 Results of Operations dated July 30, 2012

Exhibit 99



LEWIS CENTER, Ohio, August 3, 2012 – DCB Financial Corp, (OTC Bulletin Board DCBF), parent holding company of The Delaware County Bank & Trust Company, Lewis Center, Ohio (the “Bank”) announced net income of $283 compared to a net loss of $1,856 for the same period in 2011. This equates to earnings per share of $0.08 for the second quarter of 2012 versus a loss per share of $0.50 for the second quarter of 2011. The increase in earnings is mainly attributed to reduced provision for loan losses and reduced operating expenses.

“We are pleased with the progress that we have been making,” noted Ronald J. Seiffert, President and Chief Executive Officer. “We continue to make significant improvements in our loan quality and our financial results over the past year are a testament to that progress and hard work.”

Net Interest Income

Net interest income for the quarter ended June 30, 2012 was $3,868, a decrease from $4,488 reported for the prior year quarter. This change is attributed to a year-over-year decline in earning assets, partially offset by lower overall costs on deposits and borrowings. Total assets at June 30, 2012 were $510,708, which represents a decline of $105,359, or 17.1% from June 30, 2011. The reduction in assets was caused by a combination of aggressive workout tactics which have successfully reduced the number of problem credits on the Bank’s balance sheet and a reduction of long-term borrowings and time deposits. Management is continuing to deleverage the balance sheet by reducing borrowings to increase capital ratios. This will allow for greater borrowing flexibility in future periods as economic conditions continue to improve within the Bank’s footprint.

Net interest margin was 3.29% for the second quarter of 2012, compared to 3.36% for the first quarter of 2012. This decrease in margin is due to a reduced loan yields, offset by reduced borrowing costs.

Non-interest bearing deposits increased to $89,622 at June 30, 2012 from $67,959 at June 30, 2011. The Bank continues to emphasize core deposit generation as part of its focus to increase exposure to consumer markets while reducing its reliance on public funds and wholesale deposits. Funding costs remain low as interest rates, especially longer term rates, continue to remain near historical lows. Borrowings through the FHLB have been reduced by $34,274 year-over-year and stood at $17,568 at the end of the second quarter.

Noninterest Income

Total noninterest income for the quarter was $1,234, slightly behind the $1,745 recognized in the second quarter of 2011. This decline is mainly attributed to a decline in data processing fees of $286 as the Corporation exited that business in 2011 to focus on its core banking. Other non-interest revenue categories were flat or declined as retail fee production has been difficult under the new consumer protection regulatory guidelines issued in 2011.

Noninterest Expense

The total noninterest expense of $4,782 for the second quarter represents a decline of $1,039, or 17.8%, from the prior year quarter. The decrease in operating expense is attributed to a reduction in salary and benefits, a decline in occupancy expense and a reduction in insurance costs including FDIC deposit insurance premiums.

Analysis of Selected Financial Condition

The Corporation’s assets totaled $510,708 at June 30, 2012, compared to $522,881 at December 31, 2011. Cash and cash equivalents were $57,153 at the end of the quarter which is adequate to fund anticipated new loan originations. Excess cash has also been used to increase the securities portfolio. Total securities increased to $96,131 at June 30, 2012 from $89,123 at year-end 2011. Total loans decreased to $322,777 from $359,767 at year-end, 2011. The decline in outstanding loan balances is mainly due to commercial real estate work-out activities coupled with the lower volume of new originations in the current recovering economy. The Company continues to be successful in improving its non-performing loans via note sales, refinancing to other institutions and restructures.

Total deposits were up slightly from December 31, 2011, and ended the quarter at $449,644. The shift from interest bearing to non-interest bearing is the result of initiatives to grow transaction accounts, and an effort to reduce reliance on time deposits. Management also continued its efforts to reduce FHLB debt through an early pay-off of existing balances. This allowed for a productive use of short-term cash balances while continuing to deleverage the balance sheet. Long-term debt at June 30, 2012 was $17,568, down from $40,036 since year-end 2011. Management intends to continue to reduce its exposure to higher costing FHLB advances through year-end according to the expected maturity schedule of those borrowings, further reducing the outstanding debt load.

Provision and Allowance for Loan Losses

The provision for loan losses totaled $255 for the three months ended June 30, 2012, compared to $2,536 for the same period in 2011. This decline from the previous year’s quarter is mainly attributed to the reduced requirement for additional reserves based on the Bank’s reserve methodology. During the current quarter, credit risk improved due to reduced problem loans, stable nonaccrual loans and reduced delinquency rates. Credit quality continues to improve due to positive workout activities, charge-offs of bad loans and increased collection efforts. Additionally, economic activity within the bank’s market area has shown some improvement as declining unemployment rates and stabilization of the real estate sector has supported overall improved loan loss metrics. Management continues to execute a rigorous loan quality review on its problem credits to determine if additional reserves are needed for expected future credit losses.

The allowance for loan losses was $9,148, or 2.83% of total loans at June 30, 2012. Net charge-offs for the second quarter were $450. Non-accrual loans at June 30, 2012 were $7,022, stable from the previous quarter. Non-accrual balances are generally attributed to loans in the investment real estate sector that were not generating sufficient cash flow to service the debt. Management continues to focus on workout related activity to reduce non-accrual and substandard but performing loans. Delinquent loans over thirty days decreased to 1.86% of total loans at June 30, 2012 from 2.24% at December 31, 2011. As noted, delinquency trends continue to improve as credit initiatives and improving economic conditions result in the improved financial performance of borrowers. Delinquent loans continue to be primarily centered in the real estate investment and commercial portfolios.



(Dollars in thousands, except per share data)


     June 30,
    December 31,



Cash and due from financial institutions

   $ 16,301      $ 11,067   

Interest-bearing deposits

     40,852        28,247   







Total cash and cash equivalents

     57,153        39,314   

Securities available-for-sale

     95,051        88,113   

Securities held-to-maturity

     1,080        1,010   







Total securities

     96,131        89,123   


     322,777        359,767   

Less allowance for loan losses

     (9,148     (9,584







Net loans

     313,629        350,183   

Real estate owned

     4,741        4,605   

Investment in FHLB stock

     3,799        3,799   

Premises and equipment, net

     11,709        12,107   

Bank-owned life insurance

     18,233        17,822   

Accrued interest receivable and other assets

     5,313        5,928   







Total assets

   $ 510,708      $ 522,881   












   $ 89,622      $ 82,429   


     360,022        362,999   







Total deposits

     449,644        445,428   

Federal Home Loan Bank advances

     17,568        40,036   

Accrued interest payable and other liabilities

     8,299        2,718   







Total liabilities

     475,511        488,182   









Common stock, no par value, 7,500,000 shares authorized, 4,273,908 issued

     3,785        3,785   

Retained earnings

     45,587        45,145   

Treasury stock, at cost, 556,523 shares

     (13,494     (13,494

Accumulated other comprehensive loss

     (681     (737







Total shareholders’ equity

     35,197        34,699   







Total liabilities and shareholders’ equity

   $ 510,708      $ 522,181   










(Dollars in thousands, except per share data)


     Three Months Ended
     2012     2011  

Interest and dividend income



   $ 4,081      $ 5,106   

Taxable securities

     560        540   

Tax-exempt securities

     56        87   

Federal funds sold and other

     28        37   







Total interest income

     4,725        5,770   

Interest expense



     631        697   


     226        585   







Total interest expense

     857        1,282   







Net interest income

     3,868        4,488   

Provision for loan losses

     255        2,536   







Net interest income after provision for loan losses

     3,613        1,952   

Noninterest income


Service charges on deposit accounts

     596        647   

Trust department income

     224        206   

Net gain on sales of assets

     (42     (14

Gains on sale of loans

     —          19   

Treasury management fees

     65        101   

Data processing servicing fees

     —          286   

Earnings on bank owned life insurance

     166        249   


     122        251   







Total noninterest income

     1,234        1,745   

Noninterest expense


Salaries and other employee benefits

     2,358        2,767   

Occupancy and equipment

     695        920   

Professional services

     307        355   


     104        91   

Postage, freight and courier

     32        63   


     51        49   

State franchise taxes

     104        125   

Federal deposit insurance premiums

     284        482   


     847        969   







Total noninterest expense

     4,782        5,821   







Income (loss) before income tax credits

     65        (2,124

Income tax expense (credits)

     (218     (268







Net income

   $ 283      $ (1,856







Basic and diluted income (loss) per common share

   $ 0.08      $ (0.50







Dividends per share

   $ —        $ —     








Selected Key Ratios and Other Financial Data


(Dollars in thousands, except per share data)


     Three Months Ended June 30,  

Key Financial Information

   2012      2011  

Net interest income

   $ 3,868       $ 4,488   

Provision for loan losses

   $ 255       $ 2,536   

Noninterest income

   $ 1,234       $ 1,745   

Noninterest expense

   $ 4,782       $ 5,821   

Net income (loss)

   $ 283       $ (1,856

Loan balances (average)

   $ 330,722       $ 402,441   

Deposit balances (average)

   $ 456,013       $ 414,119   

Nonaccrual loans

   $ 7,022       $ 17,490   

Loans 90 days past due and accruing

   $ 985       $ 1,536   

Basic income (loss) per common share

   $ 0.08       $ (0.50

Diluted income (loss) per common share

   $ 0.08       $ (0.50

Weighted average shares outstanding:



     3,717,385         3,717,385   


     3,740,349         3,717,385   


Selected Key Ratios and Other Financial Data



     Three Months Ended June 30,  

Key Ratios

   2012     2011  

Return (annualized) on average assets

     0.22     (1.29 )% 

Return (annualized) on average shareholders’ equity

     3.24     (19.67 )% 

Annualized noninterest expense to average assets

     3.73     4.03

Efficiency ratio

     93.73     92.42

Net interest margin

     3.29     3.36

Equity to assets at period end

     6.89     5.87

Allowance to assets at period end

     2.83     2.87

Total allowance for losses on loans to nonaccrual loans

     130     64

Net chargeoffs (annualized) as a percent of average loans

     0.67     2.00

Delinquent loans (30+ days)

     1.86     3.64

Nonperforming loans to total loans

     2.18     4.42

Nonperforming assets to total assets

     2.51     3.82


Business of DCB Financial Corp

DCB Financial Corp (the “Corporation”) is a financial holding company formed under the laws of the State of Ohio. The Corporation is the parent of The Delaware County Bank & Trust Company, (the “Bank”) a state-chartered commercial bank. The Bank conducts business from its main offices at 110 Riverbend Avenue in Lewis Center, Ohio, and through its 14 branch offices located in Delaware County, Ohio and surrounding communities. The Bank provides customary retail and commercial banking services to its customers, including checking and savings accounts, time deposits, IRAs, safe deposit facilities, personal loans, commercial loans, real estate mortgage loans, night depository facilities and trust and personalized wealth management services. The Bank also provides cash management, bond registrar and payment services.

Application of Critical Accounting Policies

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

The most significant accounting policies followed by the Corporation are presented in Note 1 of the audited consolidated financial statements contained in the Corporation’s 2011 Annual Report to Shareholders. These policies, along with the disclosures presented in the other financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

Forward-Looking Statements

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