DCB Financial Corp Announces First Quarter 2016 Results and Stock Repurchase Program

LEWIS CENTER, Ohio, May 2, 2016 /PRNewswire/ -- DCB Financial Corp (the "Company"), (OTCPink: DCBF), parent holding company of The Delaware County Bank & Trust Company, Lewis Center, Ohio (the "Bank") announced net income of $116,000 or $0.02 per diluted share for the three months ended March 31, 2016, compared to net income of $239,000 or $0.03 per diluted share for the same period in 2015.       

Ronald J. Seiffert, Chairman, President and CEO of the Company said, "Loan production in the first quarter was both robust and diversified, as the strategic commitments we made to small business and residential mortgage lending in the fourth quarter of 2015 began to favorably impact our loan volumes in the first quarter. The integration of the small business and residential mortgage lending teams and related product development has been completed, and the results so far have met our expectations. Total loans were up $13.1 million in the first quarter, with these two business lines contributing $9.3 million of the loan growth during the quarter. Our traditional commercial lending division also turned in a positive quarter amid a highly competitive environment, with loan growth of $4.4 million during the quarter."

The Company also announced that its board of directors authorized the repurchase of up to three percent of the Company's outstanding common shares, or approximately 220,000 shares, up to $1.7 million. The repurchase program is authorized for up to one year, and the repurchases may be effected through open market purchases or privately negotiated transactions. Management will use its discretion in determining the timing of the repurchases and the prices at which buybacks will be made. The extent to which shares are repurchased will depend on a number of factors including market trends and prices, economic conditions, internal and regulatory trading quiet periods and alternative uses for capital. There can be no assurance that the Company will repurchase any or all of the shares authorized for repurchase.

Seiffert continued, "We believe that this repurchase program is an effective means of deploying our capital which will compliment the impact of strategies that we've recently implemented to expand our residential and small business lending capabilities in delivering value for our shareholders."

Balance Sheet Highlights
Total assets were $553.2 million at March 31, 2016, compared with $541.3 million at December 31, 2015. Much of the increase in assets during the quarter was in the Company's loan portfolio, which increased $13.1 million or 3.5%, to $391.6 million at March 31, 2016. Growth was nearly equally split among the Company's three business lines with traditional residential and home equity loans increasing $5.3 million, SBA loans increasing $4.0 million and traditional commercial loans (including real estate) increasing $4.4 million.    

In January 2016, the Bank completed the previously announced sale and leaseback of property it owns that serves as, among other things, its corporate headquarters building. The property was sold for an aggregate purchase price of $8,230,000, and the Bank simultaneously entered into a lease on the property for a fifteen year term, with the Bank having the option to extend the term of the lease for two additional periods of ten years each. The entire gain on the sale of the property of $3.1 million has been deferred and will result in a reduction of depreciation expense over the term of the lease. The lease is being accounted for as a capital lease, resulting in the recognition of a right-of-use asset (net of the deferred gain) of $5.1 million and a capital lease obligation of $8.2 million.

Deposits totaled $462.2 million at March 31, 2016, compared with $474.5 million at December 31, 2015. Most of the decrease during the quarter was the result of a net outflow in municipal deposit balances of $16.2 million during the quarter, which was partially offset by higher commercial and retail deposit balances.

Shareholders' equity was $59.3 million at March 31, 2016, compared with $58.8 million at December 31, 2015. The increase in shareholders' equity is attributable primarily to net income for the quarter of $116,000 and to an increase in accumulated other comprehensive income of $303,000 due to higher unrealized gains on securities available-for-sale.  The Company's tangible common equity to tangible assets ratio was 10.7% at March 31, 2016.

The Bank's common equity tier 1 capital ratio was 12.60% and its total risk-based capital ratio was 13.75% at March 31, 2016, both of which were well above the regulatory thresholds required to be classified as a "well-capitalized" institution, which are 6.5% and 10.0%, respectively.  

Asset Quality and the Provision for Loan Losses
Delinquent loans (including non-accrual loans) totaled $1.7 million or 0.43% of total loans at March 31, 2016, compared to $1.5 million or 0.41% of total loans at December 31, 2015.  Non-accrual loans totaled $1.2 million or 0.30% of total loans at March 31, 2016, compared to $1.2 million or 0.32% of total loans at December 31, 2015.

Non-performing assets were $7.7 million or 1.40% of total assets at March 31, 2016, compared with $7.3 million or 1.35% of total assets at December 31, 2015.  Troubled debt restructurings ("TDR's"), which are performing in accordance with the restructured terms and accruing interest, but are included in non-performing assets, were $6.4 million at March 31, 2016, compared to $6.0 million at December 31, 2015.

Net recoveries of $2,000 were recorded in the quarter ended March 31, 2016, compared to net charge-offs of $297,000 or 0.31% of average loans in the first quarter of 2015. There was no provision for loan losses recorded in the first quarter of 2016, compared to a provision for loan losses of $150,000 in the year-ago quarter. The allowance for loan losses was $4.3 million at March 31, 2016 and at December 31, 2015.  The ratio of the allowance for loan losses to total loans was 1.11% at March 31, 2016, compared to 1.14% at December 31, 2015. 

The ratio of the allowance for loan losses to non-performing loans (including TDR's) was 56.6% at March 31, 2016, compared to 59.7% at December 31, 2015. The ratio of the allowance for loan losses to non-accrual loans was 365% at March 31, 2016, compared to 355% at December 31, 2015.

Net Interest Income
Net interest income totaled $4.1 million in the quarter ended March 31, 2016, compared to $4.2 million in each of the first quarter of 2015 and the fourth quarter of 2015. The net interest margin was 3.33% in the first quarter of 2016, compared to 3.50% in the year-ago quarter and 3.33% in the fourth quarter of 2015.

The decline in the net interest margin from the year-ago quarter was due primarily to the reinvestment of loan amortization and payoffs into investment securities and loans with lower current yields, as well as from the effect of higher interest-bearing cash balances. Total average interest-earning assets were $495.9 million in the first quarter of 2016, compared to $484.9 million in the year-ago quarter and $500.4 million in the fourth quarter of 2015. Average loans outstanding in the first quarter of 2016 were $381.7 million or 77.0% of total average interest-earning assets, compared with $381.1 million or 78.6% in the year-ago quarter and $380.5 million or 76.0% in the fourth quarter of 2015. 

Total average interest-bearing deposit balances decreased $6.3 million to $349.3 million in the first quarter of 2016 compared to the year-ago quarter, due primarily to a decrease in municipal deposit balances. The average balances of interest-bearing demand, savings and money market accounts (transaction accounts) increased $8.4 million to $287.6 million in the first quarter of 2016 compared to the year-ago quarter, partially offsetting a decrease in the average balance of time deposits of $14.7 million. Transaction accounts comprised 82.3% of total interest-bearing deposits in the first quarter of 2016, compared to 78.5% in the year-ago quarter and 79.7% in the fourth quarter of 2015.

Non-Interest Income and Non-Interest Expenses
Non-interest income was $1.3 million in the first quarter of 2016, compared to $1.2 million in the first quarter of 2015 and $1.3 million in the fourth quarter of 2015. Service charges, wealth management fees and treasury management fees increased an aggregate $121,000 or 13.6% in the first quarter of 2016 compared with the year-ago quarter, primarily from the impact of changes to certain of the Bank's fees and service charges and from business development activities.

Non-interest income accounted for 24.6% of total revenue in the first quarter of 2016, compared with 21.7% in the year-ago quarter and 22.6% in the fourth quarter of 2015. 

Non-interest expenses were $5.4 million for the first quarter of 2016, compared with $5.0 million in the year-ago quarter and $5.2 million for the fourth quarter of 2015. Salaries and benefits increased $330,000 and $132,000 in the first quarter of 2016 compared to the year-ago quarter and to the fourth quarter of 2015, respectively, due primarily to the previously-announced hiring of the small business lending team and residential mortgage originators in the fourth quarter of 2015.

The Company's efficiency ratio was 99.6% in the first quarter of 2016, compared with 92.9% in the year-ago quarter and 95.0% in the fourth quarter of 2015. 

Income Taxes
An income tax benefit of $95,000 was recognized in the first quarter of 2016 due primarily to the disproportionate amount of pre-tax income that is not subject to federal income taxes, which is comprised primarily of income from bank-owned life insurance of $243,000 in the first quarter of 2016. 

About DCB Financial Corp 
DCB Financial Corp is a financial holding company formed under the laws of the State of Ohio. The Company is the parent of The Delaware County Bank & Trust Company, a state-chartered commercial bank. The Bank conducts business from its main offices at 110 Riverbend Avenue in Lewis Center, Ohio, and through its eight full-service and five limited-service branch offices located in Central Ohio. The Bank provides customary retail and commercial banking and cash management services to its customers, including checking and savings accounts, time deposits, IRAs, safe deposit facilities, personal loans, commercial loans, commercial leases, SBA loans, real estate mortgage loans, night depository facilities and trust and personalized wealth management services.

Forward-Looking Statements
This press release contains certain forward-looking statements with respect to the financial condition, results of operations and business of DCB Financial Corp, including certain plans, expectations, goals, projections, and statements.  These forward-looking statements involve certain risks and uncertainties.  Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: an increase in competitive pressure in the banking industry; changes in the interest rate environment which may affect the net interest margin; changes in the regulatory environment; general economic conditions, either nationally or regionally, resulting in, among other things, in a deterioration in credit quality; changes in business conditions and inflation; changes in the securities markets; changes in technology used in the banking business; our ability to maintain and increase market share and control expenses; increases in FDIC insurance premiums may cause earnings to decrease; and other risks set forth under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and in subsequent filings with the Securities and Exchange Commission.

The Company 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.

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SOURCE DCB Financial Corp