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

 

Exhibit 99.1

 

For Immediate Release

 

FIRST DEFIANCE FINANCIAL CORP. ANNOUNCES 2013

THIRD QUARTER EARNINGS

 

·

Net Income of $5.5 million for 2013 third quarter, up slightly from $5.4 million in the 2012 third quarter

·

Net Interest Margin of 3.84%, up from 3.80% for the third quarter of 2012

·

Average loans increased $28.0 million, up 1.8% from the 2013 second quarter

·

Provision for loan losses of $476,000, down from $705,000 in the 2012 third quarter

 

DEFIANCE, OHIO (October 28, 2013) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the third quarter ended September 30, 2013 totaled $5.5 million, or $0.54 per diluted common share, compared to $5.4 million or $0.54 per diluted common share for the quarter ended September 30, 2012.

 

“We are very pleased to report another quarter of solid earnings results, especially considering the significant reduction in mortgage banking activity due to higher mortgage rates during the quarter,” said William J. Small, Chairman, President and CEO of First Defiance Financial Corp. “Our core lines of business are performing steadily as we face many challenges within our industry and a tentative economy.”

 

Credit Quality

 

Non-performing loans totaled $30.5 million at September 30, 2013, a decrease from $37.8 million at September 30, 2012. In addition, First Defiance had $5.5 million of real estate owned at September 30, 2013 compared to $2.8 million at September 30, 2012. Accruing troubled debt restructured loans were $28.0 million at September 30, 2013 compared with $4.3 million at September 30, 2012. For the third quarter of 2013, First Defiance recorded net charge-offs of $782,000, down from $804,000 in the third quarter of 2012 and up slightly from $637,000 in the second quarter of 2013. The allowance for loan loss as a percentage of total loans was 1.66% at September 30, 2013 compared with 1.74% at September 30, 2012.

 

The third quarter results include expense for provision for loan losses of $476,000, compared with $705,000 for the same period in 2012 and $448,000 in the second quarter of 2013.

 

 

“Credit quality remained stable during the quarter, reflecting the progress we achieved a year ago,” said Small. “Our provision expense has benefitted from the sustained improvement.”

 

Net Interest Income

 

Net interest income of $17.2 million in the third quarter of 2013 was flat with the third quarter of 2012. The net interest margin increased to 3.84% in the third quarter of 2013 compared with 3.80% in the third quarter of 2012 and 3.82% in the second quarter of 2013. Yield on interest earning assets declined by 24 basis points, to 4.20% in the third quarter of 2013 from 4.44% in the third quarter of 2012. The cost of interest-bearing liabilities decreased by 31 basis points in the third quarter of 2013 to 0.46% from 0.77% in the third quarter of 2012.

 

“We are pleased with the stability we have seen in our net interest margin in this very challenging rate environment,” said Small. “We are focused on our pricing strategy throughout this persistent low rate environment.”

 

Non-Interest Income

First Defiance’s non-interest income for the third quarter of 2013 was $7.3 million compared with $7.8 million in the third quarter of 2012. Mortgage banking income decreased to $1.8 million in the third quarter of 2013, down from $2.2 million in the third quarter of 2012. Gains from the sale of mortgage loans decreased in the third quarter of 2013 to $894,000 from $2.9 million in the third quarter of 2012. Mortgage loan servicing revenue was $901,000 in the third quarter of 2013, up from $824,000 in the third quarter of 2012. The Company had a positive change in the valuation adjustment in mortgage servicing assets (“MSR”) of $480,000 in the third quarter of 2013 compared with a negative adjustment of $600,000 in the third quarter of 2012. The MSR positive valuation adjustment is a reflection of the increase in fair value of certain sectors of the Company’s portfolio of MSRs. The increase was driven by an increase in market rates in the quarter which also contributed to lower amortization of servicing rights.

 

Service fees and other charges were $2.6 million in the third quarter of 2013, down from $2.8 million in the third quarter of 2012.

 

Income from the sale of insurance and investment products increased to $2.2 million in the third quarter of 2013, from $2.0 million in the third quarter of 2012.

 

“We saw a reduction in the overall mortgage banking activity during the quarter driven by a steady decline in refinance activity,” continued Mr. Small. “We expect mortgage volume to be moderate to soft due to the volatility in the rate environment and the uncertain economic climate. It is encouraging to see purchase activity increase as a percentage of the overall housing market and we hope this momentum continues but that will not be enough to offset the decline in the refinance activity.”

 

 

Non-Interest Expenses

 

Total non-interest expense was $16.0 million in the third quarter of 2013, a decrease from $16.5 million in the third quarter of 2012.

 

Compensation and benefits increased to $8.7 million in the third quarter of 2013 compared to $8.2 million in the third quarter of 2012. The increase in compensation and benefits is mainly related to merit increases from a year ago and increase in medical insurance costs. FDIC insurance costs decreased to $326,000 in the third quarter of 2013 from $691,000 in the third quarter of 2012 due to the improvement in the Company’s risk category late in the first quarter of 2013. Data processing cost increased to $1.3 million in the third quarter of 2013 from $1.1 million in the third quarter of 2012. Credit, collection and real estate owned costs were $579,000 in the third quarter of 2013 compared to $452,000 in the same period of 2012. Other non-interest expense was $3.1 million in the third quarter of 2013, a decrease of $170,000 with the third quarter of 2012. The third quarter of 2013 included a net reversal of accrued secondary market buy-back losses of $95,000 compared to $115,000 in losses recorded in the third quarter 2012.

 

Year-To-Date Results

 

For the nine month period ended September 30, 2013, net interest income totaled $50.6 million, compared with $51.6 million in the first nine months of 2012. Average interest-earning assets decreased to $1.821 billion in the first nine months of 2013, compared to $1.878 billion in the first nine months of 2012. Net interest margin for the first nine months of 2013 was 3.82%, up 4 basis points from the 3.78% margin reported in the nine month period ended September 30, 2012.

 

The provision for loan losses in the first nine months of 2013 was $1.3 million, compared to $8.3 million recorded during the first nine months of 2012.

 

Non-interest income for the first nine months of 2013 was $24.1 million, compared to $24.2 million during the same period of 2012. Service fees and other charges were $7.5 million for the first nine months of 2013, down from $8.1 million during the same period of 2012. Mortgage banking income increased to $7.1 million for the first nine months of 2013, compared with $6.9 million during the same period of 2012. Insurance and investment sales revenues increased to $7.5 million for the first nine months of 2013, compared with $6.7 million during the same period of 2012 mainly due to increases in contingent commission of $436,000 in 2013. Non-interest income for the first nine months of 2013 included $97,000 of gain on the sale of securities compared with $528,000 during the same period of 2012.

 

Non-interest expense increased to $48.9 million for the first nine months of 2013 from $48.2 million during the same period of 2012. Compensation and benefits expense was $26.0 million for the first nine months of 2013 compared with $24.8 million during the same period of 2012 primarily due to merit increases from a year ago, higher incentive expenses and an increase in medical insurance costs. Credit, collection and real estate owned costs have increased $44,000 for the first nine months of 2013 compared to the same period of 2012 and secondary market buy-back losses have increased $359,000 for the first nine months of 2013 from the same period of 2012.

 

 

Total Assets at $2.06 Billion

 

Total assets at September 30, 2013 were $2.06 billion, compared to $2.05 billion at December 31, 2012 and $2.06 billion at September 30, 2012. Net loans receivable (excluding loans held for sale) were $1.54 billion at September 30, 2013, compared to $1.50 billion at December 31, 2012 and $1.49 billion at September 30, 2012. Total cash and cash equivalents were $127.6 million at September 30, 2013 compared with $136.8 million at December 31, 2012 and $92.4 million at September 30, 2012. Also, at September 30, 2013, goodwill and other intangible assets totaled $65.3 million compared to $66.3 million at December 31, 2012 and $66.6 million at September 30, 2012.

 

Total deposits at September 30, 2013 were $1.66 billion compared with $1.67 billion at December 31, 2012 and $1.61 billion at September 30, 2012. Non-interest bearing deposits at September 30, 2013 were $300.9 million compared to $315.1 million at December 31, 2012 and $271.3 million at September 30, 2012. Total stockholders’ equity was $269.4 million at September 30, 2013 compared to $258.1 million at December 31, 2012 and $255.1 million at September 30, 2012.

 

Dividend to be Paid November 18

The Board of Directors declared a quarterly cash dividend of $0.10 per common share payable November 18, 2013 to shareholders of record at the close of business on November 11, 2013. The dividend represents an annual dividend of 1.52 percent based on First Defiance common stock closing price on October 25, 2013. First Defiance has approximately 9,784,737 common shares outstanding.

 

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, October 29, 2013 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-888-317-6016. A live webcast may be accessed at http://services.choruscall.com/links/fdef131029.html.

 

Audio replay of the Internet Webcast will be available at www.fdef.com until January 28, 2014 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 32 full service branches and 42 ATM locations in northwest Ohio, southeast Michigan and northeast Indiana. First Insurance Group is a full-service insurance agency 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, 2012. 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 (Unaudited)

First Defiance Financial Corp.

 

		September 30,				December 31,				September 30,
(in thousands)		2013				2012				2012
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	42,629			$	45,832			$	32,406
Interest-bearing deposits			85,000				91,000				60,000
			127,629				136,832				92,406
Securities
Available-for sale, carried at fair value			184,119				194,101				269,098
Held-to-maturity, carried at amortized cost			407				508				585
			184,526				194,609				269,683
Loans			1,561,279				1,525,257				1,512,132
Allowance for loan losses			(25,964	)			(26,711	)			(26,310	)
Loans, net			1,535,315				1,498,546				1,485,822
Loans held for sale			13,391				22,064				12,201
Mortgage servicing rights			9,182				7,833				7,752
Accrued interest receivable			6,425				5,594				6,819
Federal Home Loan Bank stock			19,350				20,655				20,655
Bank Owned Life Insurance			42,504				41,832				41,591
Office properties and equipment			39,066				39,663				40,324
Real estate and other assets held for sale			5,518				3,805				2,843
Goodwill			61,525				61,525				61,525
Core deposit and other intangibles			3,793				4,738				5,083
Deferred taxes			2,253				78				-
Other assets			7,953				9,174				8,968
Total Assets		$	2,058,430			$	2,046,948			$	2,055,672
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	300,891			$	315,132			$	271,305
Interest-bearing deposits			1,357,601				1,352,340				1,338,045
Total deposits			1,658,492				1,667,472				1,609,350
Advances from Federal Home Loan Bank			22,761				12,796				81,807
Notes payable and other interest-bearing liabilities			50,822				51,702				51,991
Subordinated debentures			36,083				36,083				36,083
Advance payments by borrowers for tax and insurance			1,752				1,473				971
Deferred taxes			-				-				1,479
Other liabilities			19,161				19,294				18,855
Total liabilities			1,789,071				1,788,820				1,800,536
Stockholders’ Equity
Preferred stock			-				-				-
Common stock, net			127				127				127
Common stock warrant			878				878				878
Additional paid-in-capital			136,257				136,046				136,138
Accumulated other comprehensive income			282				4,274				5,863
Retained earnings			178,181				164,103				159,433
Treasury stock, at cost			(46,366	)			(47,300	)			(47,303	)
Total stockholders’ equity			269,359				258,128				255,136
Total Liabilities and Stockholders’ Equity		$	2,058,430			$	2,046,948			$	2,055,672

 

 

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)		2013				2012				2013				2012
Interest Income:
Loans		$	17,197			$	18,000			$	51,040			$	54,847
Investment securities			1,390				1,842				4,199				5,619
Interest-bearing deposits			44				43				174				249
FHLB stock dividends			205				213				631				656
Total interest income			18,836				20,098				56,044				61,371
Interest Expense:
Deposits			1,356				1,909				4,514				6,394
FHLB advances and other			116				759				298				2,260
Subordinated debentures			150				172				452				813
Notes Payable			58				83				178				284
Total interest expense			1,680				2,923				5,442				9,751
Net interest income			17,156				17,175				50,602				51,620
Provision for loan losses			476				705				1,349				8,306
Net interest income after provision for loan losses			16,680				16,470				49,253				43,314
Non-interest Income:
Service fees and other charges			2,605				2,790				7,539				8,148
Mortgage banking income			1,846				2,220				7,119				6,924
Gain on sale of non-mortgage loans			35				8				52				50
Gain on sale of securities			-				103				97				528
Insurance and investment sales commissions			2,225				1,952				7,538				6,679
Trust income			196				147				545				470
Income from Bank Owned Life Insurance			212				244				672				683
Other non-interest income			170				316				535				712
Total Non-interest Income			7,289				7,780				24,097				24,194
Non-interest Expense:
Compensation and benefits			8,718				8,245				25,991				24,760
Occupancy			1,739				2,170				5,087				5,718
FDIC insurance premium			326				691				1,257				2,031
State franchise tax			580				623				1,837				1,649
Data processing			1,318				1,140				3,812				3,477
Amortization of intangibles			296				344				945				1,068
Other non-interest expense			3,068				3,237				9,987				9,538
Total Non-interest Expense			16,045				16,450				48,916				48,241
Income before income taxes			7,924				7,800				24,434				19,267
Income taxes			2,445				2,366				7,286				5,759
Net Income		$	5,479			$	5,434			$	17,148			$	13,508
Dividends Accrued on Preferred Shares			-				(3	)			-				(900	)
Accretion on Preferred Shares			-				(8	)			-				(359	)
Redemption of Preferred Shares			-				-				-				642
Net Income Applicable to Common Shares		$	5,479			$	5,423			$	17,148			$	12,891
Earnings per common share:
Basic		$	0.56			$	0.56			$	1.76			$	1.33
Diluted		$	0.54			$	0.54			$	1.69			$	1.29
Average Shares Outstanding:
Basic			9,780				9,729				9,763				9,728
Diluted			10,212				10,000				10,160				9,993

 

 

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)		2013				2012				% change				2013				2012				% change
Summary of Operations
Tax-equivalent interest income (1)		$	19,242			$	20,525				(6.3	)%		$	57,270			$	62,605				(8.5	)%
Interest expense			1,680				2,923				(42.5	)			5,442				9,751				(44.2	)
Tax-equivalent net interest income (1)			17,562				17,602				(0.2	)			51,828				52,854				(1.9	)
Provision for loan losses			476				705				(32.5	)			1,349				8,306				(83.8	)
Tax-equivalent NII after provision for loan loss (1)			17,086				16,897				1.1				50,479				44,548				13.3
Investment Securities gains			-				103				(100.0	)			97				528				(81.6	)
Impairment losses on securities			-				-				-				-				-				-
Non-interest income (excluding securities gains/losses)			7,289				7,677				(5.1	)			24,000				23,666				1.4
Non-interest expense			16,045				16,450				(2.5	)			48,916				48,241				1.4
Income taxes			2,445				2,366				3.3				7,286				5,759				26.5
Net Income			5,479				5,434				0.8				17,148				13,508				26.9
Dividends Declared on Preferred Shares			-				(3	)			(100.0	)			-				(900	)			(100.0	)
Accretion on Preferred Shares			-				(8	)			(100.0	)			-				(359	)			(100.0	)
Redemption on Preferred Shares			-				-				-				-				642				NM
Net Income Applicable to Common Shares			5,479				5,423				1.0				17,148				12,891				33.0
Tax equivalent adjustment (1)			406				427				(4.9	)			1,226				1,234				(0.6	)
At Period End
Assets			2,058,430				2,055,672				0.1
Earning assets			1,863,546				1,874,671				(0.6	)
Loans			1,561,279				1,512,132				3.3
Allowance for loan losses			25,964				26,310				(1.3	)
Deposits			1,658,492				1,609,350				3.1
Stockholders’ equity			269,359				255,136				5.6
Average Balances
Assets			2,026,277				2,047,139				(1.0	)			2,028,297				2,076,772				(2.3	)
Earning assets			1,816,626				1,849,715				(1.8	)			1,820,565				1,878,032				(3.1	)
Loans			1,548,718				1,481,995				4.5				1,523,216				1,467,038				3.8
Deposits and interest-bearing liabilities			1,741,850				1,774,312				(1.8	)			1,744,342				1,785,353				(2.3	)
Deposits			1,632,712				1,605,749				1.7				1,642,754				1,615,039				1.7
Stockholders’ equity			265,488				251,592				5.5				263,135				270,824				(2.8	)
Stockholders’ equity / assets			13.10	%			12.29	%			6.6				12.97	%			13.04	%			(0.5	)
Per Common Share Data
Net Income
Basic		$	0.56			$	0.56				-			$	1.76			$	1.33				32.3
Diluted			0.54				0.54				-				1.69				1.29				31.0
Dividends			0.10				0.05				100.0				0.30				0.15				100.0
Market Value:
High		$	28.46			$	18.06				57.6			$	28.46			$	18.06				57.6
Low			22.49				15.80				42.3				18.42				14.41				27.8
Close			23.39				17.26				35.5				23.39				17.26				35.5
Common Book Value			27.44				26.13				5.0				27.44				26.13				5.0
Tangible Common Book Value			20.76				19.29				7.6				20.76				19.29				7.6
Shares outstanding, end of period (000)			9,785				9,729				0.6				9,776				9,729				0.5
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.84	%			3.80	%			0.8				3.82	%			3.78	%			1.1
Return on average assets			1.07	%			1.06	%			1.6				1.13	%			0.87	%			30.1
Return on average equity			8.19	%			8.59	%			(4.7	)			8.71	%			6.66	%			30.8
Efficiency ratio (2)			64.56	%			65.07	%			(0.8	)			64.51	%			63.04	%			2.3
Effective tax rate			30.86	%			30.33	%			1.7				29.82	%			29.89	%			(0.2	)
Dividend payout ratio (basic)			17.86	%			8.93	%			100.0				17.05	%			11.28	%			51.1

 

(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
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)		2013				2012				2013				2012
Gain from sale of mortgage loans		$	894			$	2,888			$	4,960			$	7,890
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			901				824				2,646				2,499
Amortization of mortgage servicing rights			(429	)			(892	)			(1,752	)			(2,610	)
Mortgage servicing rights valuation adjustments			480				(600	)			1,265				(855	)
			952				(668	)			2,159				(966	)
Total revenue from sale and servicing of mortgage loans		$	1,846			$	2,220			$	7,119			$	6,924

 

 

Yield Analysis
First Defiance Financial Corp.
		Three Months Ended September 30,
		(dollars in thousands)
		2013												2012
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	1,548,718			$	17,214				4.41	%		$	1,481,995			$	18,024				4.84	%
Securities			184,413				1,779				3.83	%			274,327				2,245				3.37	%
Interest Bearing Deposits			64,142				44				0.27	%			72,738				43				0.24	%
FHLB stock			19,353				205				4.20	%			20,655				213				4.10	%
Total interest-earning assets			1,816,626				19,242				4.20	%			1,849,715				20,525				4.44	%
Non-interest-earning assets			209,651												197,424
Total assets		$	2,026,277											$	2,047,139
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,330,467			$	1,356				0.40	%		$	1,339,333			$	1,909				0.57	%
FHLB advances and other			21,003				116				2.19	%			81,812				759				3.69	%
Subordinated debentures			36,130				150				1.65	%			36,141				172				1.89	%
Notes payable			52,005				58				0.44	%			50,610				83				0.65	%
Total interest-bearing liabilities			1,439,605				1,680				0.46	%			1,507,896				2,923				0.77	%
Non-interest bearing deposits			302,245				-				-				266,416				-				-
Total including non-interest-bearing demand deposits			1,741,850				1,680				0.38	%			1,774,312				2,923				0.66	%
Other non-interest-bearing liabilities			18,939												21,235
Total liabilities			1,760,789												1,795,547
Stockholders' equity			265,488												251,592
Total liabilities and stockholders' equity		$	2,026,277											$	2,047,139
Net interest income; interest rate spread						$	17,562				3.74	%						$	17,602				3.67	%
Net interest margin (3)											3.84	%											3.80	%
Average interest-earning assets  to average interest bearing liabilities											126	%											123	%

 

		Nine Months Ended September 30,
		2013												2012
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	1,523,216			$	51,092				4.48	%		$	1,467,038			$	54,925				5.00	%
Securities			192,309				5,373				3.74	%			261,628				6,775				3.58	%
Interest Bearing Deposits			85,483				174				0.27	%			128,711				249				0.26	%
FHLB stock			19,557				631				4.31	%			20,655				656				4.24	%
Total interest-earning assets			1,820,565				57,270				4.21	%			1,878,032				62,605				4.45	%
Non-interest-earning assets			207,732												198,740
Total assets		$	2,028,297											$	2,076,772
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,343,564			$	4,514				0.45	%		$	1,357,499			$	6,394				0.63	%
FHLB advances and other			16,078				298				2.48	%			81,823				2,260				3.69	%
Subordinated debentures			36,134				452				1.67	%			36,179				813				3.00	%
Notes payable			49,376				178				0.48	%			52,312				284				0.73	%
Total interest-bearing liabilities			1,445,152				5,442				0.50	%			1,527,813				9,751				0.85	%
Non-interest bearing deposits			299,190				-				-				257,540				-				-
Total including non-interest-bearing demand deposits			1,744,342				5,442				0.42	%			1,785,353				9,751				0.73	%
Other non-interest-bearing liabilities			20,820												20,595
Total liabilities			1,765,162												1,805,948
Stockholders' equity			263,135												270,824
Total liabilities and stockholders' equity		$	2,028,297											$	2,076,772
Net interest income; interest rate spread						$	51,828				3.70	%						$	52,854				3.60	%
Net interest margin (3)											3.82	%											3.78	%
Average interest-earning assets  to average interest bearing liabilities											126	%											123	%

 

(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 2013				2nd Qtr 2013				1st Qtr 2013				4th Qtr 2012				3rd Qtr 2012
Summary of Operations
Tax-equivalent interest income (1)		$	19,242			$	19,143			$	18,885			$	19,993			$	20,525
Interest expense			1,680				1,814				1,949				2,186				2,923
Tax-equivalent net interest income (1)			17,562				17,329				16,936				17,807				17,602
Provision for loan losses			476				448				425				2,618				705
Tax-equivalent NII after provision for loan losses (1)			17,086				16,881				16,511				15,189				16,897
Investment securities gains, net of impairment			-				44				53				1,606				103
Non-interest income (excluding securities gains/losses)			7,289				7,804				8,909				8,574				7,677
Non-interest expense			16,045				15,674				17,199				17,538				16,450
Income taxes			2,445				2,535				2,306				2,253				2,366
Net income			5,479				6,109				5,559				5,157				5,434
Dividends Declared on Preferred Shares			-				-				-				-				(3	)
Accretion on Preferred Shares			-				-				-				-				(8	)
Redemption on Preferred Shares			-				-				-				-				-
Net Income Applicable to Common Shares			5,479				6,109				5,559				5,157				5,423
Tax equivalent adjustment (1)			406				411				409				421				427
At Period End
Total assets		$	2,058,430			$	2,066,216			$	2,039,411			$	2,046,948			$	2,055,672
Earning assets			1,863,546				1,873,351				1,858,747				1,853,585				1,874,671
Loans			1,561,279				1,562,666				1,507,008				1,525,257				1,512,132
Allowance for loan losses			25,964				26,270				26,459				26,711				26,310
Deposits			1,658,492				1,635,708				1,656,348				1,667,472				1,609,350
Stockholders’ equity			269,359				264,497				262,643				258,128				255,136
Stockholders’ equity / assets			13.09	%			12.80	%			12.88	%			12.61	%			12.41	%
Goodwill			61,525				61,525				61,525				61,525				61,525
Average Balances
Total assets		$	2,026,277			$	2,030,707			$	2,027,906			$	2,023,890			$	2,047,139
Earning assets			1,816,626				1,825,730				1,823,089				1,815,263				1,849,715
Loans			1,548,718				1,520,708				1,500,222				1,509,611				1,481,995
Deposits and interest-bearing liabilities			1,741,850				1,745,084				1,746,092				1,744,274				1,774,312
Deposits			1,632,712				1,644,777				1,650,772				1,633,432				1,605,749
Stockholders’ equity			265,488				264,293				259,625				256,304				251,592
Stockholders’ equity / assets			13.10	%			13.01	%			12.80	%			12.66	%			12.29	%
Per Common Share Data
Net Income:
Basic		$	0.56			$	0.63			$	0.57			$	0.53			$	0.56
Diluted			0.54				0.60				0.55				0.52				0.54
Dividends			0.10				0.10				0.10				0.05				0.05
Market Value:
High		$	28.46			$	23.75			$	23.75			$	19.38			$	18.06
Low			22.49				20.80				18.42				15.75				15.80
Close			23.39				22.55				23.32				19.19				17.26
Common Book Value			27.44				26.97				26.80				26.44				26.13
Shares outstanding, end of period (in thousands)			9,785				9,776				9,766				9,729				9,729
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.84	%			3.82	%			3.78	%			3.92	%			3.80	%
Return on average assets			1.07	%			1.21	%			1.11	%			1.01	%			1.06	%
Return on average equity			8.19	%			9.27	%			8.68	%			8.00	%			8.59	%
Efficiency ratio (2)			64.56	%			62.36	%			66.55	%			66.48	%			65.07	%
Effective tax rate			30.86	%			29.33	%			29.32	%			30.40	%			30.33	%
Common dividend payout ratio (basic)			17.86	%			15.87	%			17.54	%			9.43	%			8.93	%

 

(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 2013				2nd Qtr 2013				1st Qtr 2013				4th Qtr 2012				3rd Qtr 2012
Loan Portfolio Composition
One to four family residential real estate		$	191,984			$	196,802			$	197,675			$	200,826			$	210,053
Construction			59,567				41,519				33,398				37,788				31,428
Commercial real estate			821,115				820,412				802,098				797,385				792,351
Commercial			386,160				396,158				365,551				383,817				365,510
Consumer finance			16,659				16,817				15,549				15,936				16,785
Home equity and improvement			105,727				106,570				106,524				108,718				111,563
Total loans			1,581,212				1,578,278				1,520,795				1,544,470				1,527,690
Less:
Loans in process			19,189				14,876				13,084				18,478				14,831
Deferred loan origination fees			744				736				703				735				727
Allowance for loan loss			25,964				26,270				26,459				26,711				26,310
Net Loans		$	1,535,315			$	1,536,396			$	1,480,549			$	1,498,546			$	1,485,822
Allowance for loan loss activity
Beginning allowance		$	26,270			$	26,459			$	26,711			$	26,310			$	26,409
Provision for loan losses			476				448				425				2,618				705
Credit loss charge-offs:
One to four family residential real estate			78				184				206				976				217
Commercial real estate			829				283				266				593				780
Commercial			39				316				205				541				355
Consumer finance			33				8				46				59				19
Home equity and improvement			170				170				272				497				203
Total charge-offs			1,149				961				995				2,666				1,574
Total recoveries			367				324				318				449				770
Net charge-offs (recoveries)			782				637				677				2,217				804
Ending allowance		$	25,964			$	26,270			$	26,459			$	26,711			$	26,310
Credit Quality
Total non-performing loans (1)		$	30,512			$	28,650			$	35,283			$	32,570			$	37,803
Real estate owned (REO)			5,518				6,546				4,313				3,805				2,843
Total non-performing assets (2)		$	36,030			$	35,196			$	39,596			$	36,375			$	40,646
Net charge-offs			782				637				677				2,217				804
Restructured loans, accruing (3)			28,010				28,732				27,981				28,203				4,305
Allowance for loan losses / loans			1.66	%			1.68	%			1.76	%			1.75	%			1.74	%
Allowance for loan losses / non-performing assets			72.06	%			74.64	%			66.82	%			73.43	%			64.73	%
Allowance for loan losses / non-performing loans			85.09	%			91.69	%			74.99	%			82.01	%			69.60	%
Non-performing assets / loans plus REO			2.30	%			2.24	%			2.62	%			2.38	%			2.68	%
Non-performing assets / total assets			1.75	%			1.70	%			1.94	%			1.78	%			1.98	%
Net charge-offs / average loans (annualized)			0.20	%			0.17	%			0.18	%			0.59	%			0.22	%
Deposit Balances
Non-interest-bearing demand deposits		$	300,891			$	301,742			$	291,765			$	315,132			$	271,305
Interest-bearing demand deposits and money market			681,987				659,249				681,061				664,857				636,510
Savings deposits			182,271				182,784				177,336				166,945				166,155
Retail time deposits less than $100,000			318,317				321,422				330,870				342,472				356,369
Retail time deposits greater than $100,000			175,026				168,573				173,379				176,029				176,725
National/Brokered time deposits			-				1,938				1,937				2,037				2,286
Total deposits		$	1,658,492			$	1,635,708			$	1,656,348			$	1,667,472			$	1,609,350

 

(1)

Non-performing loans consist of non-accrual loans.

(2)

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

(3)

Accruing restructured loans are loans with known credit problems that are not contractually past due and therefore are not included in non-performing loans.

 

 

Loan Delinquency Information

First Defiance Financial Corp.

 

(dollars in thousands)		Total Balance				Current				30 to 89 days  past due				Non Accrual Loans
September 30, 2013
One to four family residential real estate		$	191,984			$	188,065			$	760			$	3,159
Construction			59,567				59,567				-
Commercial real estate			821,115				802,115				574				18,426
Commercial			386,160				377,116				295				8,749
Consumer finance			16,659				16,616				43
Home equity and improvement			105,727				103,997				1,552				178
Total loans		$	1,581,212			$	1,547,476			$	3,224			$	30,512
December 31, 2012
One to four family residential real estate		$	200,826			$	195,188			$	2,036			$	3,602
Construction			37,788				37,788				-				-
Commercial real estate			797,385				773,170				1,125				23,090
Commercial			383,817				376,548				1,608				5,661
Consumer finance			15,936				15,701				235				-
Home equity and improvement			108,718				106,002				2,499				217
Total loans		$	1,544,470			$	1,504,397			$	7,503			$	32,570
September 30, 2012
One to four family residential real estate		$	210,053			$	202,073			$	2,196			$	5,784
Construction			31,428				31,428				-				-
Commercial real estate			792,351				765,611				1,749				24,991
Commercial			365,510				358,452				388				6,670
Consumer finance			16,785				16,653				117				15
Home equity and improvement			111,563				109,556				1,664				343
Total loans		$	1,527,690			$	1,483,773			$	6,114			$	37,803