Exhibit 99.1

 

	NEWS RELEASE
	Contact:	William J. Small Chairman, President and CEO (419) 782-5015 bsmall@first-fed.com

 

For Immediate Release

 

FIRST DEFIANCE FINANCIAL CORP. REPORTS $5.4 MILLION OF NET INCOME FOR THE 2012 THIRD QUARTER, UP 34% FROM THIRD QUARTER 2011

 

·

Net Income of $5.4 million for 2012 third quarter, up from $4.1 million in the third quarter of 2011

·

Diluted earnings per share for the 2012 third quarter of $0.54 up from $0.36 in the third quarter of 2011

·

Provision for Loan Losses of $705,000, down from $3.1 million in the third quarter of 2011

·

Net Interest Margin of 3.80%, down from 3.89% for the third quarter of 2011

 

DEFIANCE, OHIO (Oct 22, 2012) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for its third quarter ended September 30, 2012 totaled $5.4 million, or $0.54 per diluted common share, compared to $4.1 million or $0.36 per diluted common share for the same period in 2011.

 

“We are extremely pleased with the earnings results this quarter, not just with the strong bottom line number, but with the overall quality behind the earnings. The third quarter highlight was the substantial reduction in the level of provision of loan loss, which helped drive our earnings growth for the quarter,” said William J. Small, Chairman, President, and Chief Executive Officer of First Defiance Financial Corp. “We are also pleased that we continued to see loan growth during the quarter, as well as improvement in our linked quarter margin.”

 

Credit Quality

 

The third quarter results include expense for provision for loan losses of $705,000, compared with $3.1 million for the same period in 2011 and $4.1 million in the second quarter of 2012.

 

Non-performing loans totaled $42.1 million at September 30, 2012, a decrease of $3.2 million or 7% from $45.3 million at June 30, 2012. The September 30, 2012 balance included $37.8 million of loans that are on non-accrual and another $4.3 million of loans that are still accruing, but are considered non-performing because of changes in terms granted to borrowers. In addition, First Defiance had $2.8 million of real estate owned at September 30, 2012 which is down from $5.8 million at September 30, 2011. For the third quarter of 2012, First Defiance recorded net charge-offs of $804,000, which when annualized, represented 0.22% of average loans outstanding at September 30, 2012, down from the second quarter of 2012 level of 1.78%. The allowance for loan loss as a percentage of total loans decreased to 1.74% at September 30, 2012 from 2.24% and 2.61% at December 31, 2011 and September 30, 2011, respectively.

 

 

“We saw a substantial decline in the level of charge offs during the quarter reaching the lowest levels since before the economic downturn. We have also made continued improvement in our levels of non-performing assets,” Small said. “We believe we are at a point where declines in property values have materially slowed and has led to a more stable loan portfolio valuation.”

 

Net Interest Margin down from 2011 Third Quarter

 

Net interest income was $17.2 million in the third quarter of 2012 compared to $17.6 million for the same period in 2011. Net interest margin was 3.80% for the third quarter of 2012 compared to 3.75% in the second quarter of 2012 and 3.89% in the third quarter of 2011. The cost of interest-bearing liabilities and non-interest-bearing demand deposits decreased by 24 basis points, to 0.66% from 0.90% for the third quarter of 2011, but this was offset by a decline in the yield on interest earning assets of 32 basis points, to 4.44% for the third quarter of 2012 from 4.76% for the 2011 third quarter.

 

“The challenges on the net interest margin in this low rate environment persist and will continue as competitive pressures increase,” said Small. “We are very pleased that we were able to maintain our overall consistent asset yield compared with the second quarter of 2012.”

 

Non-Interest Income

 

First Defiance’s non-interest income for the third quarter of 2012 was $7.8 million compared with $6.9 million for the same period in 2011. Service fees and other charges were $2.8 million for the third quarter of 2012, compared with $3.1 million in the third quarter of 2011. Non-sufficient funds income was $1.1 million in the third quarter of 2012, down $379,000 from the third quarter of 2011. Other non-interest income increased to $316,000 in the third quarter of 2012 from a loss of $34,000 for the same period of 2011. This was the result of an increase of $75,000 in the value of the assets of the deferred compensation plan in the third quarter of 2012, compared to a decrease in those assets of $285,000 for the same period in 2011. Mortgage banking income increased to $2.2 million for the third quarter of 2012 from $1.4 million in the third quarter of 2011. Gains from the sale of mortgage loans increased in the third quarter of 2012 to $2.9 million from $2.1 million in the third quarter of 2011. Mortgage loan servicing revenue was down slightly at $824,000 in the third quarter of 2012 compared with $852,000 in the third quarter of 2011.

 

The third quarter of 2012 saw a continuation of the low interest rate environment which led to a negative adjustment to previously recorded mortgage servicing rights (“MSR”) impairment. First Defiance had a negative change in the valuation adjustment in mortgage servicing assets of $600,000 in the third quarter of 2012, compared with a negative valuation adjustment of $1,072,000 in the third quarter of 2011. The negative MSR valuation adjustment is a reflection of the decrease in the fair value of certain sectors of the Company’s portfolio of MSRs for this period. The interest rate environment that gives rise to increased mortgage origination activity also typically causes increases in MSR amortization and impairment, creating a natural hedge in the mortgage banking line of business.

 

 

“We have been able to steadily increase our mortgage banking income which drove the year over year improvement in our non-interest income,” said Small.

 

Non-Interest Expenses

 

Total non-interest expense was $16.5 million for the third quarter of 2012, compared with $15.5 million in the third quarter of 2011.

 

Compensation and benefits expense increased $72,000 to $8.2 million, compared to the third quarter of 2011 and $8.0 million in the second quarter of 2012. Other non-interest expense increased to $3.2 million in the third quarter of 2012 from $2.7 million for the third quarter of 2011. The other non-interest expense increase is mainly attributable to the $107,000 increase in the value of the liabilities of the deferred compensation plan for the third quarter of 2012 compared to a decrease in those liabilities of $283,000 for the same period of 2011. Credit, collection and real estate owned costs were $456,000 for the third quarter of 2012 compared to $573,000 in the same period of 2011 and secondary market buy-back losses were $115,000 in the third quarter of 2012 compared to $99,000 in the same period of 2011.

 

“These continue to be very challenging economic times which are compounded by the distraction of the elections,” said Small. “While the earnings for the quarter were positively impacted by lower provision expense and stronger mortgage banking income, we are not losing focus on our base operating strategy and core results. We continue to concentrate on improvement in asset quality which will result in lower credit costs as well as to focus on ways to become more efficient in our delivery of quality products and services.”

 

Year-To-Date Results

 

Net income for the first nine months of 2012 totaled $13.5 million, or $1.29 per diluted common share, compared to $11.5 million or $1.06 per diluted common share for the same period in 2011. The YTD EPS results include the positive impact of $.06 per diluted share relating to the redemption of the TARP preferred shares.

 

For the nine month period ended September 30, 2012, net interest income totaled $51.6 million, compared with $52.4 million in the first nine months of 2011. Average interest-earning assets increased to $1.878 billion for the first nine months of 2012, compared to $1.844 billion for the first nine months of 2011. Net interest margin for the first nine months of 2012 was 3.78%, down 11 basis points from the 3.89% margin reported in the nine month period ended September 30, 2011.

 

 

The provision for loan losses for the first nine months of 2012 was $8.3 million, flat with the same period in 2011.

 

Non-interest income for the first nine months of 2012 was $24.2 million, compared to $19.6 million during the same period of 2011. Service fees and other charges were $8.1 million for the first nine months of 2012, down $287,000 compared to the first nine months of 2011. Mortgage banking income increased to $6.9 million in the first nine months of 2012, compared with $4.5 million in the first nine months of 2011. Insurance and investment sales revenues increased to $6.7 million for the first nine months of 2012, compared with $5.1 million during the first nine months of 2011. Non-interest income for the first nine months of 2012 included $528,000 of gain on the sale of securities compared with $49,000 in the first nine months of 2011.

 

Non-interest expense increased to $48.2 million for the first nine months of 2012 from $47.2 million in the first nine months of 2011. Compensation and benefits expense increased $1.3 million in the first nine months of 2012 compared to the first nine months of 2011 mainly resulting from the insurance acquisition in July 2011 which added $1.2 million in compensation and benefits expense in the first nine months of 2012 compared to $415,000 for the same period in 2011. Credit, collection and real estate owned costs have decreased $766,000 in the first nine months of 2012 from the first nine months of 2011 and secondary market buy-back losses have declined $201,000 in the first nine months of 2012 from the first nine months of 2011.

 

Total Assets at $2.06 Billion

 

Total assets at September 30, 2012 were $2.06 billion, compared to $2.07 billion at December 31, 2011 and $2.06 billion at September 30, 2011. Net loans receivable (excluding loans held for sale) were $1.49 billion at September 30, 2012, compared to $1.45 billion at December 31, 2011 and $1.42 billion at September 30, 2011. Total cash and cash equivalents were $92.4 million at September 30, 2012, compared with $174.9 million at December 31, 2011 and $190.2 million at September 30, 2011. Also at September 30, 2012, goodwill and other intangible assets totaled $66.6 million, compared to $67.7 million at December 31, 2011 and $68.1 million at September 30, 2011.

 

Total deposits at September 30, 2012 were $1.61 billion compared with $1.60 billion at December 31, 2011 and $1.59 billion at September 30, 2011. Non-interest bearing deposits at September 30, 2012 were $271.3 million, compared to $245.9 million at December 31, 2011 and $239.6 million at September 30, 2011. Total stockholders’ equity was $255.1 million at September 30, 2012, compared to $278.1 million at December 31, 2011 and $275.1 million at the September 30, 2011.

 

Conference Call

 

First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EST) on Tuesday, Oct 23, 2012 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-317-6789. A live webcast may be accessed at http://services.choruscall.com/links/fdef121023.html

 

 

 

Audio replay of the Internet Web cast will be available at www.fdef.com until October 23, 2013 at 9:00 a.m.

 

First Defiance Financial Corp.

 

First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal operates 33 offices and 42 ATM locations in northwest Ohio, southeast Michigan and Fort Wayne, Indiana. First Insurance Group specializes in property and casualty and group health and life insurance, with six offices throughout northwest Ohio.

 

For more information, visit the company’s Web site at www.fdef.com.

 

Financial Statements and Highlights Follow-

 

Safe Harbor Statement

 

This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission (SEC) filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2011. One or more of these factors have affected or could in the future affect the Company's business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.

 

 

Consolidated Balance Sheets

First Defiance Financial Corp.

 

		(Unaudited)								(Unaudited)
		September 30,				December 31,				September 30,
(in thousands)		2012				2011				2011
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	32,406			$	31,931			$	30,234
Interest-bearing deposits			60,000				143,000				160,000
			92,406				174,931				190,234
Securities
Available-for sale, carried at fair value			269,098				232,919				232,628
Held-to-maturity, carried at amortized cost			585				661				736
			269,683				233,580				233,364
Loans			1,512,132				1,487,076				1,460,514
Allowance for loan losses			(26,310	)			(33,254	)			(38,110	)
Loans, net			1,485,822				1,453,822				1,422,404
Loans held for sale			12,201				13,841				12,951
Mortgage servicing rights			7,752				8,690				8,660
Accrued interest receivable			6,819				6,142				6,654
Federal Home Loan Bank stock			20,655				20,655				20,655
Bank Owned Life Insurance			41,591				35,908				35,682
Office properties and equipment			40,324				40,045				40,428
Real estate and other assets held for sale			2,843				3,628				5,805
Goodwill			61,525				61,525				61,568
Core deposit and other intangibles			5,083				6,151				6,499
Deferred taxes			-				629				2,988
Other assets			8,968				8,643				10,465
Total Assets		$	2,055,672			$	2,068,190			$	2,058,357
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	271,305			$	245,927			$	239,594
Interest-bearing deposits			1,338,045				1,350,314				1,350,386
Total deposits			1,609,350				1,596,241				1,589,980
Advances from Federal Home Loan Bank			81,807				81,841				81,852
Notes payable and other interest-bearing liabilities			51,991				60,386				55,477
Subordinated debentures			36,083				36,083				36,083
Advance payments by borrowers for tax and insurance			971				1,402				897
Deferred taxes			1,479				-				-
Other liabilities			18,855				14,110				18,950
Total liabilities			1,800,536				1,790,063				1,783,239
Stockholders’ Equity
Preferred stock, net of discount			-				36,641				36,594
Common stock, net			127				127				127
Common stock warrant			878				878				878
Additional paid-in-capital			136,138				135,825				135,763
Accumulated other comprehensive income			5,863				3,997				4,179
Retained earnings			159,433				148,010				144,937
Treasury stock, at cost			(47,303	)			(47,351	)			(47,360	)
Total stockholders’ equity			255,136				278,127				275,118
Total Liabilities and Stockholders’ Equity		$	2,055,672			$	2,068,190			$	2,058,357

 

 

 

Consolidated Statements of Income (Unaudited)

First Defiance Financial Corp.

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share amounts)		2012				2011				2012				2011
Interest Income:
Loans		$	18,000			$	19,488			$	54,847			$	59,553
Investment securities			1,842				1,865				5,619				5,231
Interest-bearing deposits			43				110				249				351
FHLB stock dividends			213				203				656				662
Total interest income			20,098				21,666				61,371				65,797
Interest Expense:
Deposits			1,909				2,791				6,394				9,648
FHLB advances and other			759				768				2,260				2,442
Subordinated debentures			172				333				813				945
Notes Payable			83				127				284				397
Total interest expense			2,923				4,019				9,751				13,432
Net interest income			17,175				17,647				51,620				52,365
Provision for loan losses			705				3,097				8,306				8,335
Net interest income after provision for loan losses			16,470				14,550				43,314				44,030
Non-interest Income:
Service fees and other charges			2,790				3,071				8,148				8,435
Mortgage banking income			2,220				1,355				6,924				4,549
Gain on sale of non-mortgage loans			8				52				50				351
Gain on sale of securities			103				-				528				49
Impairment on securities			-				-				-				(2	)
Insurance and investment sales commissions			1,952				2,042				6,679				5,146
Trust income			147				143				470				465
Income from Bank Owned Life Insurance			244				228				683				703
Other non-interest income			316				(34	)			712				(56	)
Total Non-interest Income			7,780				6,857				24,194				19,640
Non-interest Expense:
Compensation and benefits			8,245				8,173				24,760				23,458
Occupancy			2,170				1,779				5,718				5,423
FDIC insurance premium			691				674				2,031				2,264
State franchise tax			623				541				1,649				1,625
Data processing			1,140				1,077				3,477				3,117
Acquisition related charges			-				99				-				234
Amortization of intangibles			344				386				1,068				1,051
Other non-interest expense			3,237				2,733				9,538				10,003
Total Non-interest Expense			16,450				15,462				48,241				47,175
Income before income taxes			7,800				5,945				19,267				16,495
Income taxes			2,366				1,884				5,759				5,024
Net Income		$	5,434			$	4,061			$	13,508			$	11,471
Dividends Accrued on Preferred Shares			(3	)			(463	)			(900	)			(1,388	)
Accretion on Preferred Shares			(8	)			(45	)			(359	)			(132	)
Redemption of Preferred Shares			0				0				642				0
Net Income Applicable to Common Shares		$	5,423			$	3,553			$	12,891			$	9,951
Earnings per common share:
Basic		$	0.56			$	0.37			$	1.33			$	1.08
Diluted		$	0.54			$	0.36			$	1.29			$	1.06
Average Shares Outstanding:
Basic			9,729				9,725				9,728				9,248
Diluted			10,000				9,895				9,993				9,417

 

 

Financial Summary and Comparison

First Defiance Financial Corp.

 

		(Unaudited)												(Unaudited)
		Three Months Ended												Nine Months Ended
		September 30,												September 30,
(dollars in thousands, except per share data)		2012				2011				%change				2012				2011				%change
Summary of Operations
Tax-equivalent interest income (1)		$	20,525			$	22,052				(6.9	)%		$	62,605			$	66,881				(6.4	)%
Interest expense			2,923				4,019				(27.3	)			9,751				13,432				(27.4	)
Tax-equivalent net interest income (1)			17,602				18,033				(2.4	)			52,854				53,449				(1.1	)
Provision for loan losses			705				3,097				(77.2	)			8,306				8,335				(0.3	)
Tax-equivalent NII after provision for loan loss (1)			16,897				14,936				13.1				44,548				45,114				(1.3	)
Investment Securities gains			103				-				NM				528				49				NM
Impairment losses on securities			-				-				-				-				(2	)			(100.0	)
Non-interest income (excluding securities gains/losses)			7,677				6,857				12.0				23,666				19,593				20.8
Non-interest expense			16,450				15,462				6.4				48,241				47,175				2.3
Income taxes			2,366				1,884				25.6				5,759				5,024				14.6
Net Income			5,434				4,061				33.8				13,508				11,471				17.8
Dividends Declared on Preferred Shares			(3	)			(463	)			(99.4	)			(900	)			(1,388	)			(35.2	)
Accretion on Preferred Shares			(8	)			(45	)			(82.2	)			(359	)			(132	)			172.0
Net Income Applicable to Common Shares			5,423				3,553				52.6				12,891				9,951				29.5
Tax equivalent adjustment (1)			427				386				10.6				1,234				1,084				13.8
At Period End
Assets			2,055,672				2,058,357				(0.1	)
Earning assets			1,874,671				1,887,484				(0.7	)
Loans			1,512,132				1,460,514				3.5
Allowance for loan losses			26,310				38,110				(31.0	)
Deposits			1,609,350				1,589,980				1.2
Stockholders’ equity			255,136				275,118				(7.3	)
Average Balances
Assets			2,047,139				2,056,111				(0.4	)			2,076,772				2,055,199				1.0
Earning assets			1,849,715				1,843,881				0.3				1,878,032				1,843,811				1.9
Deposits and interest-bearing liabilities			1,774,312				1,762,663				0.7				1,785,353				1,777,696				0.4
Loans			1,481,995				1,419,987				4.4				1,467,038				1,436,505				2.1
Deposits			1,605,749				1,583,173				1.4				1,615,039				1,588,526				1.7
Stockholders’ equity			251,592				271,736				(7.4	)			270,824				259,935				4.2
Stockholders’ equity / assets			12.29	%			13.22	%			(7.0	)			13.04	%			12.65	%			3.1
Per Common Share Data
Net Income
Basic		$	0.56			$	0.37				51.4			$	1.33			$	1.08				23.1
Diluted			0.54				0.36				50.0				1.29				1.06				21.7
Dividends			0.05				-				NM				0.15				-				NM
Market Value:
High		$	18.06			$	15.51				16.4			$	18.06			$	15.51				16.4
Low			15.80				12.60				25.4				14.41				11.89				21.2
Close			17.26				13.14				31.4				17.26				13.14				31.4
Common Book Value			26.13				24.43				7.0				26.13				24.43				7.0
Tangible Common Book Value			19.29				17.44				10.6				19.29				17.44				10.6
Shares outstanding, end of period (000)			9,729				9,726				0.0				9,729				9,726				0.0
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.80	%			3.89	%			(2.2	)			3.78	%			3.89	%			(3.0	)
Return on average assets			1.06	%			0.78	%			34.8				0.87	%			0.75	%			16.4
Return on average equity			8.59	%			5.93	%			44.9				6.66	%			5.90	%			12.9
Efficiency ratio (2)			65.07	%			62.12	%			4.8				63.04	%			64.59	%			(2.4	)
Effective tax rate			30.33	%			31.69	%			(4.3	)			29.89	%			30.46	%			(1.9	)
Dividend payout ratio (basic)			8.93	%			0.00	%			NM				7.52	%			0.00	%			NM

 

(1)	Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35%
(2)	Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains or losses, net.
NM  Percentage change not meaningful

 

 

Income from Mortgage Banking (Unaudited)

 

Revenue from sales and servicing of mortgage loans consisted of the following:

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(dollars in thousands)		2012				2011				2012				2011
Gain from sale of mortgage loans		$	2,888			$	2,128			$	7,890			$	3,954
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			824				852				2,499				2,529
Amortization of mortgage servicing rights			(892	)			(553	)			(2,610	)			(1,349	)
Mortgage servicing rights valuation adjustments			(600	)			(1,072	)			(855	)			(585	)
			(668	)			(773	)			(966	)			595
Total revenue from sale and servicing of mortgage loans		$	2,220			$	1,355			$	6,924			$	4,549

 

 

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended September 30,
		(dollars in thousands)
		2012												2011
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	1,481,995			$	18,024				4.84	%		$	1,419,987			$	19,519				5.45	%
Securities			274,327				2,245				3.37	%			220,040				2,220				4.10	%
Interest Bearing Deposits			72,738				43				0.24	%			183,199				110				0.24	%
FHLB stock			20,655				213				4.10	%			20,655				203				3.90	%
Total interest-earning assets			1,849,715				20,525				4.44	%			1,843,881				22,052				4.76	%
Non-interest-earning assets			197,424												212,230
Total assets		$	2,047,139											$	2,056,111
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,339,333			$	1,909				0.57	%		$	1,353,009			$	2,791				0.82	%
FHLB advances and other			81,812				759				3.69	%			88,146				768				3.46	%
Other Borrowings			50,610				83				0.65	%			55,149				127				0.91	%
Subordinated debentures			36,141				172				1.89	%			36,195				333				3.65	%
Total interest-bearing liabilities			1,507,896				2,923				0.77	%			1,532,499				4,019				1.04	%
Non-interest bearing deposits			266,416				-				-				230,164				-				-
Total including non-interest-bearing demand deposits			1,774,312				2,923				0.66	%			1,762,663				4,019				0.90	%
Other non-interest-bearing liabilities			21,235												21,712
Total liabilities			1,795,547												1,784,375
Stockholders' equity			251,592												271,736
Total liabilities and stockholders' equity		$	2,047,139											$	2,056,111
Net interest income; interest rate spread						$	17,602				3.67	%						$	18,033				3.72	%
Net interest margin (3)											3.80	%											3.89	%
Average interest-earning assets  to average interest bearing liabilities											123	%											120	%

 

		Nine Months Ended September 30,
		2012												2011
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	1,467,038			$	54,925				5.00	%		$	1,436,505			$	59,650				5.57	%
Securities			261,628				6,775				3.58	%			195,640				6,218				4.33	%
Interest Bearing Deposits			128,711				249				0.26	%			190,776				351				0.25	%
FHLB stock			20,655				656				4.24	%			20,890				662				4.25	%
Total interest-earning assets			1,878,032				62,605				4.45	%			1,843,811				66,881				4.86	%
Non-interest-earning assets			198,740												211,388
Total assets		$	2,076,772											$	2,055,199
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,357,499			$	6,394				0.63	%		$	1,362,239			$	9,648				0.95	%
FHLB advances and other			81,823				2,260				3.69	%			97,610				2,442				3.35	%
Other Borrowings			52,312				284				0.73	%			55,341				397				0.96	%
Subordinated debentures			36,179				813				3.00	%			36,219				945				3.50	%
Total interest-bearing liabilities			1,527,813				9,751				0.85	%			1,551,409				13,432				1.16	%
Non-interest bearing deposits			257,540				-				-				226,287				-				-
Total including non-interest-bearing demand deposits			1,785,353				9,751				0.73	%			1,777,696				13,432				1.01	%
Other non-interest-bearing liabilities			20,595												17,568
Total liabilities			1,805,948												1,795,264
Stockholders' equity			270,824												259,935
Total liabilities and stockholders' equity		$	2,076,772											$	2,055,199
Net interest income; interest rate spread						$	52,854				3.60	%						$	53,449				3.70	%
Net interest margin (3)											3.78	%											3.89	%
Average interest-earning assets  to average interest bearing liabilities											123	%											119	%

 

(1)

Interest on certain tax exempt loans and securities is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 35%.

(2)

Annualized

(3)

Net interest margin is net interest income divided by average interest-earning assets.

 

 

Selected Quarterly Information

First Defiance Financial Corp.

  

(dollars in thousands, except per share data)		3rd Qtr 2012				2nd Qtr 2012				1st Qtr 2012				4th Qtr 2011				3rd Qtr 2011
Summary of Operations
Tax-equivalent interest income (1)		$	20,525			$	20,935			$	21,144			$	21,665			$	22,052
Interest expense			2,923				3,273				3,555				3,754				4,019
Tax-equivalent net interest income (1)			17,602				17,662				17,589				17,911				18,033
Provision for loan losses			705				4,097				3,503				4,099				3,097
Tax-equivalent NII after provision for loan losses (1)			16,897				13,565				14,086				13,812				14,936
Investment securities gains, including impairment			103				382				43				169				-
Non-interest income (excluding securities gains/losses)			7,677				7,612				8,376				7,707				6,857
Non-interest expense			16,450				15,532				16,259				15,589				15,462
Income taxes			2,366				1,690				1,703				1,640				1,884
Net income			5,434				3,921				4,153				4,064				4,061
Dividends Declared on Preferred Shares			(3	)			(435	)			(462	)			(462	)			(463	)
Accretion on Preferred Shares			(8	)			(305	)			(46	)			(46	)			(45	)
Net Income Applicable to Common Shares			5,423				3,823				3,645				3,556				3,553
Tax equivalent adjustment (1)			427				416				390				395				386
At Period End
Total assets		$	2,055,672			$	2,067,616			$	2,142,264			$	2,068,190			$	2,058,357
Earning assets			1,874,671				1,885,846				1,966,419				1,898,152				1,887,484
Loans			1,512,132				1,500,637				1,473,955				1,487,076				1,460,514
Allowance for loan losses			26,310				26,409				28,833				33,254				38,110
Deposits			1,609,350				1,613,611				1,671,370				1,596,241				1,589,980
Stockholders’ equity			255,136				249,870				281,364				278,127				275,118
Stockholders’ equity / assets			12.41	%			12.08	%			13.13	%			13.45	%			13.37	%
Goodwill			61,525				61,525				61,525				61,525				61,568
Average Balances
Total assets		$	2,047,139			$	2,102,675			$	2,080,502			$	2,067,881			$	2,056,111
Earning assets			1,849,715				1,903,714				1,879,393				1,861,186				1,843,881
Deposits and interest-bearing liabilities			1,774,312				1,800,036				1,781,710				1,772,812				1,762,663
Loans			1,481,995				1,462,312				1,456,807				1,440,839				1,419,987
Deposits			1,605,749				1,629,094				1,610,275				1,594,938				1,583,173
Stockholders’ equity			251,592				281,031				279,848				275,848				271,736
Stockholders’ equity / assets			12.29	%			13.37	%			13.45	%			13.34	%			13.22	%
Per Common Share Data
Net Income:
Basic		$	0.56			$	0.39			$	0.37			$	0.37			$	0.37
Diluted			0.54				0.38				0.37				0.36				0.36
Dividends			0.05				0.05				0.05				0.05				-
Market Value:
High		$	18.06			$	17.46			$	17.76			$	15.39			$	15.51
Low			15.80				15.23				14.41				13.00				12.60
Close			17.26				17.12				16.86				14.59				13.14
Book Value			26.13				25.49				25.06				24.74				24.43
Shares outstanding, end of period (in thousands)			9,729				9,729				9,728				9,726				9,726
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.80	%			3.75	%			3.78	%			3.83	%			3.89	%
Return on average assets			1.06	%			0.75	%			0.80	%			0.78	%			0.78	%
Return on average equity			8.59	%			5.61	%			5.97	%			5.85	%			5.93	%
Efficiency ratio (2)			65.07	%			61.45	%			62.62	%			60.85	%			62.12	%
Effective tax rate			30.33	%			30.12	%			29.08	%			28.75	%			31.69	%
Common dividend payout ratio (basic)			8.93	%			12.82	%			13.51	%			13.51	%			0.00	%

 

(1)

Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35%

(2)

Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains, net.

 

 

Selected Quarterly Information

First Defiance Financial Corp.

 

(dollars in thousands, except per share data)		3rd Qtr 2012				2nd Qtr 2012				1st Qtr 2012				4th Qtr 2011				3rd Qtr 2011
Loan Portfolio Composition
One to four family residential real estate		$	210,053			$	210,520			$	202,132			$	203,401			$	189,669
Construction			31,428				22,923				36,362				31,552				35,203
Commercial real estate			792,351				775,526				790,168				775,992				766,459
Commercial			365,510				372,266				326,904				349,053				339,128
Consumer finance			16,785				17,127				17,647				18,887				19,701
Home equity and improvement			111,563				112,427				114,891				122,143				124,956
Total loans			1,527,690				1,510,789				1,488,104				1,501,028				1,475,116
Less:
Loans in process			14,831				9,439				13,430				13,243				13,709
Deferred loan origination fees			727				713				719				709				893
Allowance for loan loss			26,310				26,409				28,833				33,254				38,110
Net Loans		$	1,485,822			$	1,474,228			$	1,445,122			$	1,453,822			$	1,422,404
Allowance for loan loss activity
Beginning allowance		$	26,409			$	28,833			$	33,254			$	38,110			$	40,530
Provision for loan losses			705				4,097				3,503				4,099				3,097
Credit loss charge-offs:
One to four family residential real estate			217				584				738				666				647
Commercial real estate			780				5,448				4,496				6,738				2,622
Commercial			355				486				2666				1,423				2,533
Consumer finance			19				14				41				27				36
Home equity and improvement			203				254				211				251				290
Total charge-offs			1,574				6,786				8,152				9,105				6,128
Total recoveries			770				265				228				150				611
Net charge-offs (recoveries)			804				6,521				7,924				8,955				5,517
Ending allowance		$	26,310			$	26,409			$	28,833			$	33,254			$	38,110
Credit Quality
Non-accrual loans		$	37,803			$	41,702			$	45,351			$	39,328			$	48,297
Restructured loans, accruing			4,305				3,581				3,820				3,380				2,934
Total non-performing loans (1)			42,108				45,283				49,171				42,708				51,231
Real estate owned (REO)			2,843				3,538				3,408				3,628				5,805
Total non-performing assets (2)		$	44,951			$	48,821			$	52,579			$	46,336			$	57,036
Net charge-offs			804				6,521				7,924				8,955				5,517
Allowance for loan losses / loans			1.74	%			1.76	%			1.96	%			2.24	%			2.61	%
Allowance for loan losses / non-performing assets			58.53	%			54.09	%			54.84	%			71.77	%			66.82	%
Allowance for loan losses / non-performing loans			62.48	%			58.32	%			58.64	%			77.86	%			74.39	%
Non-performing assets / loans plus REO			2.97	%			3.25	%			3.56	%			3.11	%			3.89	%
Non-performing assets / total assets			2.19	%			2.36	%			2.45	%			2.24	%			2.77	%
Net charge-offs / average loans (annualized)			0.22	%			1.78	%			2.18	%			2.49	%			1.55	%
Deposit Balances
Non-interest-bearing demand deposits		$	271,305			$	261,211			$	265,716			$	245,927			$	239,594
Interest-bearing demand deposits and money market			636,510				628,760				665,889				609,057				607,965
Savings deposits			166,155				165,699				165,325				155,101				155,244
Retail time deposits less than $100,000			356,369				370,443				383,471				428,222				429,686
Retail time deposits greater than $100,000			176,725				180,594				183,420				147,298				143,477
National/Brokered time deposits			2,286				6,904				7,549				10,636				14,014
Total deposits		$	1,609,350			$	1,613,611			$	1,671,370			$	1,596,241			$	1,589,980

 

(1)

Non-performing loans consist of non-accrual loans that are contractually past due 90 days and loans with known credit problems that are not contractually past due.

(2)

Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof.

 

 

Loan Delinquency Information

First Defiance Financial Corp.

 

(dollars in thousands)		Total Balance				Current				30 to 89 days past due				Non Accrual Loans				Troubled Debt Restructuring
September 30, 2012
One to four family residential real estate		$	210,053			$	199,163			$	2,181			$	5,784			$	2,925
Construction			31,428				31,428				-				-				-
Commercial real estate			792,351				764,435				1,749				24,991				1,176
Commercial			365,510				358,264				388				6,670				188
Consumer finance			16,785				16,653				117				15				-
Home equity and improvement			111,563				109,540				1,664				343				16
Total loans		$	1,527,690			$	1,479,483			$	6,099			$	37,803			$	4,305
December 31, 2011
One to four family residential real estate		$	203,401			$	195,752			$	2,120			$	3,890			$	1,639
Construction			31,552				31,552				-				-				-
Commercial real estate			775,992				742,868				3,441				28,150				1,533
Commercial			349,053				341,666				334				6,884				169
Consumer finance			18,887				18,713				164				10				-
Home equity and improvement			122,143				118,869				2,841				394				39
Total loans		$	1,501,028			$	1,449,420			$	8,900			$	39,328			$	3,380
September 30, 2011
One to four family residential real estate		$	189,669			$	182,182			$	2,287			$	4,017			$	1,183
Construction			35,203				35,143				-				60				-
Commercial real estate			766,459				727,706				2,229				35,268				1,256
Commercial			339,128				330,117				360				8,478				173
Consumer finance			19,701				19,511				170				20				-
Home equity and improvement			124,956				121,965				2,215				454				322
Total loans		$	1,475,116			$	1,416,624			$	7,261			$	48,297			$	2,934