##### Table of Contents



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: MARCH 31, 2007
 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
  Ohio
    
    31-1469837(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 
  
   þ o
  o þ o
  o þ




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##### 



PagePART I  FINANCIAL INFORMATIONITEM 1  Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Comprehensive Income
    
    
    5Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to the Condensed Consolidated Financial Statements
    
    
    7ITEM 1A  Risk Factors
    
    
    14ITEM 2  Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    15ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    19ITEM 4  Controls and Procedures
    
    
    20PART II  OTHER INFORMATION
    
    
    21SIGNATURES
    
    
    23EX-31.1EX-31.2EX-32.1EX-32.2




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Financial Statements
 March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCash and due from financial institutions
    
    $
    16,445
    
    
    $
    15,894Federal funds sold
    
    
    8,400
    
    
    
    Total cash and cash equivalents
    
    
    24,845
    
    
    
    15,894Securities available for sale
    
    
    88,050
    
    
    
    88,071Loans held for sale
    
    
    1,372
    
    
    
    1,455Loans
    
    
    546,858
    
    
    
    552,463Less allowance for loan losses
    
    
    (5,344
    )
    
    
    (5,442
    )Net loans
    
    
    541,514
    
    
    
    547,021Real estate owned
    
    
    387
    
    
    
    Investment in FHLB stock
    
    
    3,665
    
    
    
    3,604Premises and equipment, net
    
    
    9,781
    
    
    
    9,468Investment in unconsolidated affiliates
    
    
    968
    
    
    
    968Bank-owned life insurance
    
    
    9,525
    
    
    
    9,396Accrued interest receivable and other assets
    
    
    7,757
    
    
    
    5,995Total assets
    
    $
    687,864
    
    
    $
    681,872LIABILITIESDepositsNoninterest-bearing
    
    $
    60,362
    
    
    $
    70,428Interest-bearing
    
    
    476,077
    
    
    
    453,666Total deposits
    
    
    536,439
    
    
    
    524,094Federal funds purchased and other short-term borrowings
    
    
    3,398
    
    
    
    1,776Federal Home Loan Bank advances
    
    
    86,203
    
    
    
    93,736Accrued interest payable and other liabilities
    
    
    1,603
    
    
    
    867Total liabilities
    
    
    627,643
    
    
    
    620,473SHAREHOLDERS EQUITYCommon stock, no par value, 7,500,000 shares authorized,
4,273,908 and 4,273,750 issued at March 31, 2007 and
at December 31, 2006
    
    
    3,780
    
    
    
    3,780Retained earnings
    
    
    69,778
    
    
    
    68,807Treasury stock, at cost, 538,430 and 458,786
shares at March 31, 2007 and December 31, 2006
    
    
    (13,091
    )
    
    
    (10,841
    )Accumulated other comprehensive loss
    
    
    (246
    )
    
    
    (347
    )Total shareholders equity
    
    
    60,221
    
    
    
    61,399Total liabilities and shareholders equity
    
    $
    687,864
    
    
    $
    681,872
 3.




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Three Months EndedMarch 31,2007
    
    
    2006Interest and dividend incomeLoans
    
    $
    10,051
    
    
    $
    9,427Taxable securities
    
    
    874
    
    
    
    854Tax-exempt securities
    
    
    229
    
    
    
    233Federal funds sold and other
    
    
    65
    
    
    
    30Total interest income
    
    
    11,219
    
    
    
    10,544Interest expenseDeposits
    
    
    4,724
    
    
    
    3,646Borrowings
    
    
    1,016
    
    
    
    1,075Total interest expense
    
    
    5,740
    
    
    
    4,721Net interest income
    
    
    5,479
    
    
    
    5,823Provision for loan losses
    
    
    615
    
    
    
    560Net interest income after provision for loan losses
    
    
    4,864
    
    
    
    5,263Noninterest incomeService charges on deposit accounts
    
    
    625
    
    
    
    628Trust department income
    
    
    249
    
    
    
    218Gains on sale of loans
    
    
    88
    
    
    
    51Treasury management fees
    
    
    116
    
    
    
    153Data processing servicing fees
    
    
    90
    
    
    
    83Earnings on bank owned life insurance
    
    
    129
    
    
    
    128Other
    
    
    182
    
    
    
    123Total noninterest income
    
    
    1,479
    
    
    
    1,384Noninterest expenseSalaries and other employee benefits
    
    
    2,352
    
    
    
    2,217Occupancy and equipment
    
    
    834
    
    
    
    787Professional services
    
    
    99
    
    
    
    115Advertising
    
    
    99
    
    
    
    74Postage, freight and courier
    
    
    76
    
    
    
    97Supplies
    
    
    64
    
    
    
    68State franchise taxes
    
    
    158
    
    
    
    134Other
    
    
    509
    
    
    
    510Total noninterest expense
    
    
    4,191
    
    
    
    4,002Income before income taxes
    
    
    2,152
    
    
    
    2,645Federal income tax expense
    
    
    641
    
    
    
    785Net income
    
    $
    1,511
    
    
    $
    1,860Basic and diluted earnings per common share
    
    $
    0.40
    
    
    $
    0.49Dividends per share
    
    $
    0.14
    
    
    $
    0.13
 4.




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Three Months EndedMarch 31,2007
    
    
    2006Net income
    
    $
    1,511
    
    
    $
    1,860Unrealized gains (losses) on securities
available for sale, net of tax (benefits)
    
    
    101
    
    
    
    (99
    )Comprehensive income
    
    $
    1,612
    
    
    $
    1,761Accumulated other comprehensive loss
    
    $
    (246
    )
    
    $
    (671
    )
 5.




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Three Months EndedMarch 31,2007
    
    
    2006Cash flows provided by operating activities
    
    $
    495
    
    
    $
    1,953Cash flows provided by (used in) investing activitiesSecurities available for salePurchases
    
    
    (5,819
    )
    
    
    (7,743
    )Maturities, principal payments and calls
    
    
    6,400
    
    
    
    5,909Net change in loans
    
    
    4,804
    
    
    
    (15,389
    )Premises and equipment expenditures
    
    
    (573
    )
    
    
    (347
    )Net cash flows provided by (used in) investing activities
    
    
    4,812
    
    
    
    (17,570
    )Cash flows provided by financing activitiesNet change in deposits
    
    
    12,345
    
    
    
    36,212Net change in federal funds purchased and other short-term borrowings
    
    
    1,622
    
    
    
    (11,881
    )Repayment of Federal Home Loan Bank advances
    
    
    (7,533
    )
    
    
    (11,835
    )Purchase of treasury shares, net
    
    
    (2,250
    )
    
    
    (334
    )Cash dividends paid
    
    
    (540
    )
    
    
    (499
    )Net cash provided by financing activities
    
    
    3,644
    
    
    
    11,663Net change in cash and cash equivalents
    
    
    8,951
    
    
    
    (3,954
    )Cash and cash equivalents at beginning of period
    
    
    15,894
    
    
    
    18,069Cash and cash equivalents at end of period
    
    $
    24,845
    
    
    $
    14,115Supplemental disclosures of cash flow information:Cash paid during the period forInterest on deposits and borrowings
    
    $
    4,291
    
    
    $
    4,567Cash dividends declared but unpaid
    
    $
    534
    
    
    $
    497
  6.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     Earnings per share
  Three Months EndedMarch 31,2007
    
    2006Weighted-average common
shares outstanding (basic)
    
    
    3,787,533
    
    
    
    3,821,202Dilutive effect of assumed
exercise of stock options
    
    
    8,437
    
    
    
    5,573Weighted-average common
shares outstanding (diluted)
    
    
    3,795,970
    
    
    
    3,826,775
  7.




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Stock option plan
      8.




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Three Months EndedMarch 31, 2007WEIGHTEDWEIGHTED
    
    
    AVERAGE REMAININGAVERAGE EXERCISE
    
    
    CONTRACTUALSHARES
    
    
    PRICE
    
    
    LIFEOutstanding at beginning of period
    
    
    70,040
    
    
    $
    27.19
    
    
    8.0 yearsGranted
    
    
    3,521
    
    
    
    28.40
    
    
    9.2 yearsExercised
    
    
    (158
    )
    
    
    28.69Forfeited
    
    
    (787
    )
    
    
    27.62Outstanding at end of period
    
    
    72,616
    
    
    $
    27.24
    
    
    8.6 yearsOptions exercisable at period end
    
    
    11,047
    
    
    $
    25.08Weighted-average fair value of options
granted during the period
    
    
    
    
    
    $
    4.63
 Year EndedDecember 31, 2006WEIGHTEDAVERAGE EXERCISESHARES
    
    
    PRICEOutstanding at beginning of year
    
    
    40,687
    
    
    $
    25.31Granted
    
    
    34,531
    
    
    $
    29.94Exercised
    
    
    (428
    )
    
    $
    30.26Forfeited
    
    
    (4,750
    )
    
    $
    28.56Outstanding at end of year
    
    
    70,040
    
    
    $
    27.19Options exercisable at year-end
    
    
    8,959
    
    
    $
    24.49Weighted-average fair value of options
granted during the year
    
    
    
    
    
    $
    6.19
  NUMBER OUTSTANDING
    
    RANGE OF EXERCISE PRICES72,616
    
    $23.40  $30.70
 9.




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Newly Issued Accounting Standards
   
    
    Separately recognize financial assets as servicing assets or servicing liabilities, 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 disclosure for all separately recognized
servicing assets and servicing liabilities.
  10.




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11.




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Application of Critical Accounting Policies
   NOTE 2  SECURITIES
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueMarch 31, 2007U.S. Government and agency obligations
    
    $
    20,674
    
    
    $
    3
    
    
    $
    (141
    )
    
    $
    20,536State and municipal obligations
    
    
    24,412
    
    
    
    99
    
    
    
    (69
    )
    
    
    24,442Corporate bonds
    
    
    8,474
    
    
    
    49
    
    
    
    
    
    
    
    8,523Mortgage-backed securities
    
    
    34,804
    
    
    
    51
    
    
    
    (399
    )
    
    
    34,456Total debt securities
    
    
    88,364
    
    
    
    202
    
    
    
    (609
    )
    
    
    87,957Other securities
    
    
    58
    
    
    
    42
    
    
    
    (7
    )
    
    
    93Total
    
    $
    88,422
    
    
    $
    244
    
    
    $
    (616
    )
    
    $
    88,050
 12.




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Less than 12 months)
    
    
    (12 months or longer)Estimated
    
    
    Gross
    
    
    
    
    
    
    Estimated
    
    
    Gross
    
    
    
    
    
    
    Estimated
    
    
    TotalDescription of
    
    Number of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    UnrealizedSecurities
    
    investments
    
    
    value
    
    
    losses
    
    
    investments
    
    
    value
    
    
    losses
    
    
    investments
    
    
    value
    
    
    lossesU.S. Government and
agency obligations
    
    
    5
    
    
    $
    4,960
    
    
    $
    (5
    )
    
    
    15
    
    
    $
    12,539
    
    
    $
    (136
    )
    
    
    20
    
    
    $
    17,499
    
    
    $
    (141
    )State and municipal
obligations
    
    
    11
    
    
    
    3,715
    
    
    
    (16
    )
    
    
    22
    
    
    
    8,526
    
    
    
    (53
    )
    
    
    33
    
    
    
    12,241
    
    
    
    (69
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    470
    
    
    
    
    
    
    
    1
    
    
    
    470
    
    
    
    Mortgage-backed and
other securities
    
    
    9
    
    
    
    1,026
    
    
    
    (12
    )
    
    
    72
    
    
    
    25,286
    
    
    
    (394
    )
    
    
    81
    
    
    
    26,312
    
    
    
    (406
    )Total temporarily
impaired securities
    
    
    25
    
    
    $
    9,701
    
    
    $
    (33
    )
    
    
    110
    
    
    $
    46,821
    
    
    $
    (583
    )
    
    
    135
    
    
    $
    56,522
    
    
    $
    (616
    )
     Available for saleAmortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    4,965
    
    
    $
    4,946Due from one to five years
    
    
    11,224
    
    
    
    11,134Due from five to ten years
    
    
    18,410
    
    
    
    18,398Due after ten years
    
    
    18,961
    
    
    
    19,023Mortgage-backed and related securities
    
    
    34,804
    
    
    
    34,456Total debt securities
    
    
    88,364
    
    
    
    87,957Other securities
    
    
    58
    
    
    
    93Total
    
    $
    88,422
    
    
    $
    88,050
  13.




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NOTE 3  LOANS
  March 31,2007Commercial and industrial
    
    $
    42,071Commercial real estate
    
    
    202,261Residential real estate and home equity
    
    
    207,247Real estate construction and land development
    
    
    49,782Consumer and credit card
    
    
    45,027546,388Add: Net deferred loan origination costs
    
    
    470Total loans receivable
    
    $
    546,858
 NOTE 4  ALLOWANCE FOR LOAN LOSSES
  Three months endedMarch 31,2007
    
    
    2006Balance at beginning of period
    
    $
    5,442
    
    
    $
    5,535Provision for loan losses
    
    
    615
    
    
    
    560Loans charged off
    
    
    (830
    )
    
    
    (601
    )Recoveries
    
    
    117
    
    
    
    123Balance at end of period
    
    $
    5,344
    
    
    $
    5,617
  March 31,
    
    
    December 31,2007
    
    
    2006Loans past due 90 days or more and still accruing
    
    $
    5,609
    
    
    $
    3,307Nonaccrual loans
    
    
    5,044
    
    
    
    5,189Total
    
    $
    10,653
    
    
    $
    8,496
  Period-end loans with no allocated allowance for loan losses
    
    $
    
    
    
    $
    Period-end loans with allocated allowance for loan losses
    
    
    5,044
    
    
    
    5,189Total
    
    $
    5,044
    
    
    $
    5,189Amount of the allowance for loan losses allocated
    
    $
    1,921
    
    
    $
    1,562Average of impaired loans during the period
    
    $
    5,266
    
    
    $
    2,584
 
 Risk Factors
  14.




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Managements Discussion and Analysis of Financial Condition
and Results of Operations
 INTRODUCTION
  FORWARD-LOOKING STATEMENTS
   ANALYSIS OF FINANCIAL CONDITION
   15.




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COMPARISON OF RESULTS OF OPERATIONS
 Net Income.
 Net Interest Income.
 16.




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Provision and Allowance for Loan Losses.
  Noninterest Income.
 17.




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Noninterest Expense.
 Income Taxes.
 LIQUIDITY
   CAPITAL RESOURCES
    18.




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PAYMENT DUE BY YEARCONCTRACTUAL OBLIGATIONS
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 yearsFHLB advances
    
    $
    86,203
    
    
    $
    11,435
    
    
    $
    19,090
    
    
    $
    5,000
    
    
    $
    50,678Federal funds purchased and
other short-term borrowings
    
    
    3,398
    
    
    
    3,398
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    6,221
    
    
    
    592
    
    
    
    1,114
    
    
    
    1,046
    
    
    
    3,469Loan and line of credit
commitments
    
    
    132,373
    
    
    
    132,373
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    228,195
    
    
    $
    147,798
    
    
    $
    20,204
    
    
    $
    6,046
    
    
    $
    54,147
 
 Quantitative and Qualitative Disclosure About Market Risk
 ASSET AND LIABILITY MANAGEMENT AND MARKET RISK
     19.




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Controls and Procedures
   20.




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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 (orTotal Number of
    
    Approximate DollarShares (or Units)
    
    Value) of Shares(a)
    
    
    
    
    
    Purchased as Part
    
    (or Units) that MayTotal Number of
    
    (b)
    
    of Publicly
    
    Yet Be PurchasedShares (or Units)
    
    Average Price Paid
    
    Announced Plans
    
    Under the Plans orPeriod
    
    Purchased
    
    per Share (or Unit)
    
    or Programs(1)
    
    ProgramsMonth #l
1/1/2007 to
1/31/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Month #2
2/1/2007 to
2/28/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Month #3
3/1/2007 to
3/31/2007
    
    
    79,644
    
    
    $
    28.25
    
    
    
    79,644
    
    
    
    Total
    
    
    79,644
    
    
    $
    28.25
    
    
    
    79,644
    
    
    
    
 
 (1)
    
    On June 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 June 16, 2005. 21.




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Item 3 
    
    Defaults Upon Senior Securities:There are no matters required to be reported under this item.Item 4 
    
    Submission of Matters to a Vote of Security Holders:There are no matters required to be reported under this item.Item 5 
    
    Other Information:There are no matters required to be reported under this item.Item 6 
    
    Exhibits:`
    
    Exhibits  The following exhibits are filed as a part of this report:
 Exhibit No.
    
    Exhibit3.1
    
    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 200231.2
    
    Certification pursuant to section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to
section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002
 22.




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DCB FINANCIAL CORP
(Registrant)Date:  May 10, 2007
    /s/ Jeffrey Benton(Signature)Jeffrey Benton
President and Chief Executive OfficerDate:  May 10, 2007
    /s/ John A. Ustaszewski(Signature)John A. Ustaszewski
Senior Vice President and Chief Financial Officer 23.




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EXHIBITNUMBER
    
    DESCRIPTION3.1
    
    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.
 24.