Exhibit 99.1

 

	NEWS RELEASE
	Contact:        Donald P. Hileman
	President and CEO
	(419) 782-5104
	dhileman@first-fed.com

 

  

For Immediate Release

 

FIRST DEFIANCE FINANCIAL CORP. REPORTS

RECORD FULL YEAR EARNINGS OF $3.19 PER SHARE FOR 2016,

UP 13.1% FROM FULL YEAR 2015

 

·

Earnings per diluted share of $0.81 for 2016 fourth quarter, up from $0.71 per share in the fourth quarter of 2015

·

Net income of $7.4 million for 2016 fourth quarter compared to $6.6 million in the fourth quarter of 2015

·

Net interest margin of 3.76% for the 2016 fourth quarter, compared to 3.77% in the fourth quarter of 2015

·

Loan growth $14.8 million during the 2016 fourth quarter

·

Deposit growth $53.9 million during the 2016 fourth quarter

·

Non-performing loans declined 11.8% from 2015 year end

 

DEFIANCE, OHIO (January 23, 2017) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the fiscal year ended December 31, 2016 totaled $28.8 million, or $3.19 per diluted common share, compared to $26.4 million or $2.82 per diluted common share for the year ended December 31, 2015.

 

For the fourth quarter 2016, First Defiance earned $7.4 million, or $0.81 per diluted common share compared to $6.6 million, or $0.71 per diluted common share for the fourth quarter of 2015.

 

“We are very pleased that our strong finish to 2016 allowed us to mark our fourth consecutive year of record earnings performance, with diluted earnings per share up 13.1% over last year. Also for the year, our return on assets was 1.20% on total assets that grew $178 million, or 7.7%,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “This notable performance in 2016 leaves us optimistic for overcoming potential challenges in 2017 and completing our upcoming merger with Commercial Bancshares, Inc. in February.”

 

Net interest income up compared to fourth quarter 2015

 

Net interest income of $20.5 million in the fourth quarter of 2016 was up from $19.0 million in the fourth quarter of 2015. The growth in net interest income of $1.5 million included interest recoveries primarily from loan payoffs of $501,000 in the fourth quarter 2016 compared to $228,000 of interest recoveries in the fourth quarter 2015. Net interest margin was 3.76% for the fourth quarter of 2016, up from 3.69% in the third quarter 2016, but down slightly from 3.77% in the fourth quarter of 2015. Yield on interest earning assets increased by 4 basis points, to 4.16% in the fourth quarter of 2016 from 4.12% in the fourth quarter of 2015. The cost of interest-bearing liabilities increased by 7 basis points in the fourth quarter of 2016 to 0.53% from 0.46% in the fourth quarter of 2015.

 

 

“Our net interest income expansion in the fourth quarter was mainly driven by our continued balance sheet growth coupled with our steady net interest margin and further enhanced by recovered interest on loan payoffs,” said Hileman. “In addition, we believe our interest rate risk is well balanced and positioned for prospective rate changes in 2017.”

 

Non-interest income up from fourth quarter 2015

 

First Defiance’s non-interest income for the fourth quarter of 2016 was $8.3 million compared to $7.7 million in the fourth quarter of 2015. Mortgage banking income increased to $1.9 million in the fourth quarter of 2016, up from $1.5 million in the fourth quarter of 2015 due to higher volumes of both purchase and refinance loans throughout our market area. Gains from the sale of mortgage loans increased in the fourth quarter of 2016 to $1.2 million from $836,000 in the fourth quarter of 2015. Mortgage loan servicing revenue was $922,000 in the fourth quarter of 2016, up slightly from $910,000 in the fourth quarter of 2015. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $241,000 in the fourth quarter of 2016 compared to a positive adjustment of $75,000 in the fourth quarter of 2015.

 

For the fourth quarter 2016, service fees and other charges were $2.7 million, down $33,000 from $2.7 million in the fourth quarter of 2015; and commissions from the sale of insurance products were $2.3 million, up $45,000 from $2.3 million in the fourth quarter of 2015. Trust income was $445,000 in the fourth quarter of 2016, up from $367,000 in the fourth quarter of 2015.

 

“Total non-interest income in the fourth quarter grew $563,000, up 7.3% over the fourth quarter last year,” said Hileman. “We were particularly pleased with our success in mortgage banking with fourth quarter loan origination levels up 38% from a year ago, and in trust income with revenues up 21% over the fourth quarter last year.”

 

Non-interest expenses up from fourth quarter 2015

 

Total non-interest expense was $18.2 million in the fourth quarter of 2016, up from $17.3 million in the fourth quarter of 2015. The fourth quarter 2016 included expenses of $292,000 related to the pending merger of Commercial Bancshares, Inc. and $300,000 for a termination of a lease. Compensation and benefits in the fourth quarter of 2016 was $9.9 million, an increase of $64,000 compared to the fourth quarter of 2015. Increases in compensation for merit raises and staff additions for growth were mostly offset by lower costs for medical insurance and other benefits. Occupancy expense was $2.0 million in the fourth quarter 2016, up $147,000 from the fourth quarter 2015. Data processing cost was $1.6 million in the fourth quarter of 2016, up $213,000 from the fourth quarter of 2015. Other non-interest expense of $3.9 million in the fourth quarter of 2016, increased from $3.3 million in the fourth quarter of 2015 primarily due to merger related expenses and the lease termination.

 

 

Credit quality

 

Non-performing loans totaled $14.3 million at December 31, 2016, a decrease from $16.3 million at December 31, 2015. In addition, First Defiance had $455,000 of real estate owned at December 31, 2016, down from $1.3 million at December 31, 2015. Accruing troubled debt restructured loans were $10.5 million at December 31, 2016, a decrease from $11.2 million at December 31, 2015. For the fourth quarter of 2016, First Defiance recorded net recoveries of $110,000, compared to net recoveries of $129,000 in the fourth quarter of 2015. The allowance for loan loss as a percentage of total loans was 1.33% at December 31, 2016, compared to 1.41% at December 31, 2015.

 

The fourth quarter results included a credit provision for loan losses of $149,000 compared to an expense of $43,000 for the same period in 2015.

 

“Our fourth quarter results showed continued improvement in our asset quality as non-performing assets declined $4.1 million during the quarter to 0.60% of total assets,” said Hileman. “This reduction, along with net recoveries on loans in the quarter, resulted in both a credit provision expense for the fourth quarter and an increase of our allowance for loan losses coverage of non-performing loans to 180% at year end.”

 

Annual results

 

For the full year ended on December 31, 2016, net income totaled $28.8 million, or $3.19 per diluted common share, compared to $26.4 million or $2.82 per diluted common share for 2015.

 

Net interest income for 2016 totaled $78.9 million, compared with $74.1 million for 2015. Average interest-earning assets increased to $2.17 billion for 2016, compared to $2.00 billion in 2015. Net interest margin for 2016 was 3.74%, down 7 basis points from the 3.81% margin for 2015.

 

The provision for loan losses for 2016 was $283,000, compared to $136,000 in 2015, reflecting the continued strong credit quality throughout the year.

 

Non-interest income for the year 2016 was $34.0 million, compared to $31.8 million in 2015. Service fees and other charges were $10.9 million for 2016, up from $10.8 million in 2015. Mortgage banking income increased to $7.3 million for 2016, compared to $6.7 million in 2015. Gains on the sale of non-mortgage loans were $753,000 for 2016, compared to $824,000 during 2015. Insurance and investment sales revenues increased to $10.4 million for 2016, compared to $10.1 million for 2015. Non-interest income for 2016 included $509,000 of net securities gains compared to $22,000 of net securities gains for 2015.

 

Non-interest expense increased to $71.1 million for 2016 from $67.9 million in 2015. Compensation and benefits expense was $40.2 million for 2016 compared with $37.8 million for 2015. The $2.4 million increase in compensation and benefits over the prior year is mainly related to merit increases and new staff for growth strategies, higher incentive compensation accruals and higher medical insurance costs. Other expenses increased $603,000 mainly due to acquisition related costs for the pending acquisition of Commercial Bancshares, Inc. and the expense related to the lease termination. Occupancy expense also increased $221,000, and data processing expense increased $284,000. These increases were partially offset by decreases in FDIC insurance premiums of $155,000, amortization of intangibles of $165,000 and financial institutions taxes of $2,000.

 

 

Total assets at $2.5 billion

 

Total assets at December 31, 2016 were $2.48 billion compared to $2.30 billion at December 31, 2015. Net loans receivable (excluding loans held for sale) were $1.91 billion at December 31, 2016, compared to $1.78 billion at December 31, 2015. Total cash and cash equivalents were $99.0 million at December 31, 2016, compared to $79.8 million at December 31, 2015. Also, at December 31, 2016, goodwill and other intangible assets totaled $63.1 million compared to $63.7 million at December 31, 2015.

 

Total deposits at December 31, 2016 were $1.98 billion compared with $1.84 billion at December 31, 2015. Non-interest bearing deposits at December 31, 2016 were $487.7 million compared to $420.7 million at December 31, 2015. Total stockholders’ equity was $293.0 million at December 31, 2016, compared to $280.2 million at December 31, 2015.

 

Pending merger with Commercial Bancshares, Inc.

 

On August 23, 2016, First Defiance announced a definitive agreement to acquire Commercial Bancshares, Inc. and its wholly-owned subsidiary, Commercial Savings Bank (“CSB”). CSB, a $342 million commercial bank, operates 7 full-service branches in Wyandot, Marion and Hancock counties in Ohio. The merger is expected to close in the first quarter of 2017 and is subject to Commercial Bancshares’ shareholder approval and other conditions set forth in the merger agreement.

 

Dividend to be paid February 24

 

The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable February 24, 2017 to shareholders of record at the close of business on February 17, 2017. The dividend represents an annual dividend of 2.09 percent based on the First Defiance common stock closing price on January 20, 2017. First Defiance has approximately 8,984,456 common shares outstanding.

 

Conference call

 

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, January 24, 2017 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. In addition, a live webcast may be accessed at http://services.choruscall.com/links/fdef170124.html.

 

The replay of the conference call Webcast will be available at www.fdef.com until Wednesday, January 24, 2018 at 9:00 a.m. ET.

 

 

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 Bank operates 35 full-service branches and numerous ATM locations in northwest Ohio, southeast Michigan and northeast Indiana and a loan production office in Columbus, Ohio. First Insurance Group is a full-service insurance agency with six offices throughout northwest Ohio.

 

For more information, visit the company’s website 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 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 First Defiance 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 our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2015. One or more of these factors have affected or could in the future affect First Defiance'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 First Defiance or any other persons, that our objectives and plans will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of First Defiance. We assume no obligation to update any forward-looking statements.

 

As required by U.S. GAAP, First Defiance will evaluate the impact of subsequent events through the issuance date of its December 31, 2016 consolidated financial statements as part of its Annual Report on Form 10-K to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

 

 

Consolidated Balance Sheets (Unaudited)
First Defiance Financial Corp.
		December 31,				December 31,
(in thousands)		2016				2015
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	53,003			$	38,769
Interest-bearing deposits			46,000				41,000
			99,003				79,769
Securities
Available-for sale, carried at fair value			250,992				236,435
Held-to-maturity, carried at amortized cost			184				243
			251,176				236,678
Loans			1,940,487				1,802,217
Allowance for loan losses			(25,884	)			(25,382	)
Loans, net			1,914,603				1,776,835
Loans held for sale			9,607				5,523
Mortgage servicing rights			9,595				9,248
Accrued interest receivable			6,760				6,171
Federal Home Loan Bank stock			13,798				13,801
Bank Owned Life Insurance			52,817				51,908
Office properties and equipment			36,958				38,166
Real estate and other assets held for sale			455				1,321
Goodwill			61,798				61,798
Core deposit and other intangibles			1,336				1,871
Deferred Taxes			358				-
Other assets			17,479				14,587
Total Assets		$	2,475,743			$	2,297,676
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	487,663			$	420,691
Interest-bearing deposits			1,493,965				1,415,446
Total deposits			1,981,628				1,836,137
Advances from Federal Home Loan Bank			103,943				59,902
Notes payable and other interest-bearing liabilities			31,816				57,188
Subordinated debentures			36,083				36,083
Advance payments by borrowers for tax and insurance			2,650				2,674
Deferred taxes			-				877
Other liabilities			26,605				24,618
Total Liabilities			2,182,725				2,017,479
Stockholders’ Equity
Preferred stock			-				-
Common stock, net			127				127
Additional paid-in-capital			126,390				125,734
Accumulated other comprehensive income			215				3,622
Retained earnings			240,592				219,737
Treasury stock, at cost			(74,306	)			(69,023	)
Total stockholders’ equity			293,018				280,197
Total Liabilities and Stockholders’ Equity		$	2,475,743			$	2,297,676

 

  

Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.

		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
(in thousands, except per share amounts)		2016				2015				2016				2015
Interest Income:
Loans		$	20,975			$	18,901			$	80,217			$	73,346
Investment securities			1,576				1,680				6,247				6,769
Interest-bearing deposits			80				56				367				169
FHLB stock dividends			139				139				552				552
Total interest income			22,770				20,776				87,383				80,836
Interest Expense:
Deposits			1,648				1,394				6,261				5,341
FHLB advances and other			348				214				1,288				675
Subordinated debentures			205				162				753				613
Notes Payable			30				39				138				152
Total interest expense			2,231				1,809				8,440				6,781
Net interest income			20,539				18,967				78,943				74,055
Provision for loan losses			(149	)			43				283				136
Net interest income after provision for loan losses			20,688				18,924				78,660				73,919
Non-interest Income:
Service fees and other charges			2,701				2,734				10,909				10,752
Mortgage banking income			1,928				1,465				7,270				6,713
Gain on sale of non-mortgage loans			149				48				753				824
Gain on sale of securities			-				22				509				22
Insurance commissions			2,328				2,283				10,441				10,076
Trust income			445				367				1,701				1,462
Income from Bank Owned Life Insurance			223				237				909				895
Other non-interest income			519				574				1,538				1,059
Total Non-interest Income			8,293				7,730				34,030				31,803
Non-interest Expense:
Compensation and benefits			9,937				9,873				40,187				37,769
Occupancy			1,983				1,836				7,418				7,197
FDIC insurance premium			161				325				1,169				1,324
Financial institutions tax			442				443				1,781				1,783
Data processing			1,644				1,431				6,367				6,083
Amortization of intangibles			116				163				535				699
Other non-interest expense			3,897				3,276				13,636				13,034
Total Non-interest Expense			18,180				17,347				71,093				67,889
Income before income taxes			10,801				9,307				41,597				37,833
Income taxes			3,436				2,744				12,754				11,410
Net Income		$	7,365			$	6,563			$	28,843			$	26,423
Earnings per common share:
Basic		$	0.82			$	0.72			$	3.21			$	2.87
Diluted		$	0.81			$	0.71			$	3.19			$	2.82
Average Shares Outstanding:
Basic			8,982				9,146				8,980				9,221
Diluted			9,060				9,235				9,053				9,383

 

 

Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.

		Three Months Ended												Twelve Months Ended
		December 31,												December 31,
(dollars in thousands, except per share data)		2016				2015				% change				2016				2015				% change
Summary of Operations
Tax-equivalent interest income (1)		$	23,219			$	21,256				9.2	%		$	89,213			$	82,741				7.8	%
Interest expense			2,231				1,809				23.3				8,440				6,781				24.5
Tax-equivalent net interest income (1)			20,988				19,447				7.9				80,773				75,960				6.3
Provision for loan losses			(149	)			43				NM				283				136				108.1
Tax-equivalent NII after provision for loan loss (1)			21,137				19,404				8.9				80,490				75,824				6.2
Investment Securities gains			-				22				NM				509				22				NM
Non-interest income (excluding securities gains/losses)			8,293				7,708				7.6				33,521				31,781				5.5
Non-interest expense			18,180				17,347				4.8				71,093				67,889				4.7
Income taxes			3,436				2,744				25.2				12,754				11,410				11.8
Net Income			7,365				6,563				12.2				28,843				26,423				9.2
Tax equivalent adjustment (1)			449				480				(6.5	)			1,830				1,905				(3.9	)
At Period End
Assets			2,475,743				2,297,676				7.7
Earning assets			2,261,068				2,099,219				7.7
Loans			1,940,487				1,802,217				7.7
Allowance for loan losses			25,884				25,382				2.0
Deposits			1,981,628				1,836,137				7.9
Stockholders’ equity			293,018				280,197				4.6
Average Balances
Assets			2,458,952				2,276,060				8.0				2,397,439				2,222,866				7.9
Earning assets			2,226,868				2,051,331				8.6				2,168,046				2,000,477				8.4
Loans			1,908,731				1,732,472				10.2				1,853,419				1,687,413				9.8
Deposits and interest-bearing liabilities			2,133,868				1,967,199				8.5				2,080,444				1,916,758				8.5
Deposits			1,954,631				1,823,396				7.2				1,905,621				1,787,876				6.6
Stockholders’ equity			292,301				279,192				4.7				285,634				277,645				2.9
Stockholders’ equity / assets			11.89	%			12.27	%			(3.1	)			11.91	%			12.49	%			(4.6	)
Per Common Share Data
Net Income
Basic		$	0.82			$	0.72				13.9			$	3.21			$	2.87				11.8
Diluted			0.81				0.71				14.1				3.19				2.82				13.1
Dividends			0.22				0.20				10.0				0.88				0.775				13.5
Market Value:
High		$	52.31			$	42.46				23.2			$	52.31			$	42.46				23.2
Low			36.91				35.01				5.4				34.80				29.05				19.8
Close			50.74				37.78				34.3				50.74				37.78				34.3
Common Book Value			32.62				30.78				6.0				32.62				30.78				6.0
Tangible Common Book Value (1)			25.59				23.79				7.6				25.59				23.79				7.6
Shares outstanding, end of period (000)			8,983				9,102				(1.3	)			8,983				9,102				(1.3	)
Performance Ratios (annualized)
Tax-equivalent net interest margin (2)			3.76	%			3.77	%			(0.4	)			3.74	%			3.81	%			(1.9	)
Return on average assets			1.19	%			1.14	%			4.2				1.20	%			1.19	%			1.2
Return on average equity			10.02	%			9.33	%			7.5				10.10	%			9.52	%			6.1
Efficiency ratio (3)			62.09	%			63.88	%			(2.8	)			62.20	%			63.01	%			(1.3	)
Effective tax rate			31.81	%			29.48	%			7.9				30.66	%			30.16	%			1.7
Dividend payout ratio (basic)			26.83	%			27.78	%			(3.4	)			27.41	%			27.00	%			1.5

  

(1)

Tangible common book value = total stockholders' equity less the sum of goodwill, core deposit and other intangibles, and preferred stock divided by shares outstanding at the end of the period.

(2)

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%

(3)

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								Twelve Months Ended
		December 31,								December 31,
(dollars in thousands)		2016				2015				2016				2015
Gain from sale of mortgage loans		$	1,208			$	836			$	5,311			$	4,564
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			922				910				3,560				3,503
Amortization of mortgage servicing rights			(443	)			(356	)			(1,724	)			(1,620	)
Mortgage servicing rights valuation adjustments			241				75				123				266
			720				629				1,959				2,149
Total revenue from sale and servicing of mortgage loans		$	1,928			$	1,465			$	7,270			$	6,713

 

   

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended December 31,
		(dollars in thousands)
		2016												2015
		Average								Yield				Average								Yield
			Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	1,908,731			$	21,028				4.38	%		$	1,732,472			$	18,954				4.34	%
Securities			243,456				1,972				3.30	%(3)			236,361				2,107				3.64	%(3)
Interest Bearing Deposits			60,881				80				0.52	%			68,697				56				0.32	%
FHLB stock			13,800				139				4.01	%			13,801				139				4.00	%
Total interest-earning assets			2,226,868				23,219				4.16	%			2,051,331				21,256				4.12	%
Non-interest-earning assets			232,084												224,729
Total assets		$	2,458,952											$	2,276,060
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,484,531			$	1,648				0.44	%		$	1,408,283			$	1,394				0.39	%
FHLB advances and other			95,631				348				1.45	%			50,419				214				1.68	%
Subordinated debentures			36,146				205				2.26	%			36,128				162				1.78	%
Notes payable			47,460				30				0.25	%			57,256				39				0.27	%
Total interest-bearing liabilities			1,663,768				2,231				0.53	%			1,552,086				1,809				0.46	%
Non-interest bearing deposits			470,100				-				-				415,113				-				-
Total including non-interest-bearing demand deposits			2,133,868				2,231				0.42	%			1,967,199				1,809				0.36	%
Other non-interest-bearing liabilities			32,783												29,669
Total liabilities			2,166,651												1,996,868
Stockholders' equity			292,301												279,192
Total liabilities and stockholders' equity		$	2,458,952											$	2,276,060
Net interest income; interest rate spread						$	20,988				3.63	%						$	19,447				3.66	%
Net interest margin (4)											3.76	%											3.77	%
Average interest-earning assets to average interest bearing liabilities											134	%											132	%

 

		Twelve Months Ended December 31,
		2016												2015
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	1,853,419			$	80,423				4.34	%		$	1,687,413			$	73,544				4.36	%
Securities			233,407				7,871				3.48	%(3)			239,852				8,476				3.64	%(3)
Interest Bearing Deposits			67,420				367				0.54	%			59,410				169				0.27	%
FHLB stock			13,800				552				4.00	%			13,802				552				4.00	%
Total interest-earning assets			2,168,046				89,213				4.13	%			2,000,477				82,741				4.15	%
Non-interest-earning assets			229,393												222,389
Total assets		$	2,397,439											$	2,222,866
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,463,890			$	6,261				0.43	%		$	1,399,619			$	5,341				0.38	%
FHLB advances and other			85,856				1,288				1.50	%			38,134				675				1.77	%
Subordinated debentures			36,141				753				2.09	%			36,129				613				1.70	%
Notes payable			52,826				138				0.26	%			54,619				152				0.28	%
Total interest-bearing liabilities			1,638,713				8,440				0.52	%			1,528,501				6,781				0.44	%
Non-interest bearing deposits			441,731				-				-				388,257				-				-
Total including non-interest-bearing demand deposits			2,080,444				8,440				0.41	%			1,916,758				6,781				0.35	%
Other non-interest-bearing liabilities			31,361												28,463
Total liabilities			2,111,805												1,945,221
Stockholders' equity			285,634												277,645
Total liabilities and stockholders' equity		$	2,397,439											$	2,222,866
Net interest income; interest rate spread						$	80,773				3.61	%						$	75,960				3.71	%
Net interest margin (4)											3.74	%											3.81	%
Average interest-earning assets to average interest bearing liabilities											132	%											131	%

  

(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)

Securities yield = annualized interest income divided by the average balance of securities, excluding average unrealized gains/losses.

(4)

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)		4th Qtr 2016				3rd Qtr 2016				2nd Qtr 2016				1st Qtr 2016				4th Qtr 2015
Summary of Operations
Tax-equivalent interest income (1)		$	23,219			$	22,449			$	21,940			$	21,605			$	21,256
Interest expense			2,231				2,183				2,084				1,942				1,809
Tax-equivalent net interest income (1)			20,988				20,266				19,856				19,663				19,447
Provision for loan losses			(149	)			15				53				364				43
Tax-equivalent NII after provision for loan losses (1)			21,137				20,251				19,803				19,299				19,404
Investment securities gains, net of impairment			-				151				227				131				22
Non-interest income (excluding securities gains/losses)			8,293				8,375				8,348				8,505				7,708
Non-interest expense			18,180				18,292				17,347				17,274				17,347
Income taxes			3,436				2,994				3,307				3,017				2,744
Net income			7,365				7,045				7,264				7,169				6,563
Tax equivalent adjustment (1)			449				446				460				475				480
At Period End
Total assets		$	2,475,743			$	2,450,040			$	2,409,599			$	2,358,931			$	2,297,676
Earning assets			2,261,068				2,240,747				2,200,517				2,158,177				2,099,219
Loans			1,940,487				1,925,694				1,861,403				1,824,986				1,802,217
Allowance for loan losses			25,884				25,923				25,948				25,668				25,382
Deposits			1,981,628				1,927,686				1,920,270				1,871,157				1,836,137
Stockholders’ equity			293,018				292,138				286,616				280,418				280,197
Stockholders’ equity / assets			11.84	%			11.92	%			11.89	%			11.89	%			12.19	%
Goodwill			61,798				61,798				61,798				61,798				61,798
Average Balances
Total assets		$	2,458,952			$	2,425,535			$	2,391,064			$	2,314,203			$	2,276,060
Earning assets			2,226,868				2,194,170				2,162,574				2,088,582				2,051,331
Loans			1,908,731				1,879,760				1,828,984				1,796,200				1,732,472
Deposits and interest-bearing liabilities			2,133,868				2,103,054				2,079,442				2,005,395				1,967,199
Deposits			1,954,631				1,929,368				1,903,139				1,835,345				1,823,396
Stockholders’ equity			292,301				288,609				282,573				279,051				279,192
Stockholders’ equity / assets			11.89	%			11.90	%			11.82	%			12.06	%			12.27	%
Per Common Share Data
Net Income:
Basic		$	0.82			$	0.78			$	0.81			$	0.80			$	0.72
Diluted			0.81				0.78				0.80				0.79				0.71
Dividends			0.22				0.22				0.22				0.22				0.20
Market Value:
High		$	52.31			$	46.83			$	41.21			$	40.98			$	42.46
Low			36.91				35.90				37.53				34.80				35.01
Close			50.74				44.64				38.85				38.41				37.78
Common Book Value			32.62				32.53				31.95				31.29				30.78
Shares outstanding, end of period (in thousands)			8,983				8,980				8,971				8,961				9,102
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.76	%			3.69	%			3.71	%			3.80	%			3.77	%
Return on average assets			1.19	%			1.16	%			1.22	%			1.25	%			1.14	%
Return on average equity			10.02	%			9.71	%			10.34	%			10.33	%			9.33	%
Efficiency ratio (2)			62.09	%			63.87	%			61.51	%			61.32	%			63.88	%
Effective tax rate			31.81	%			29.82	%			31.28	%			29.62	%			29.48	%
Common dividend payout ratio (basic)			26.83	%			28.21	%			27.16	%			27.50	%			27.78	%

 

(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)		4th Qtr 2016				3rd Qtr 2016				2nd Qtr 2016				1st Qtr 2016				4th Qtr 2015
Loan Portfolio Composition
One to four family residential real estate		$	207,550			$	209,097			$	206,861			$	208,818			$	205,330
Construction			182,886				177,075				161,282				145,635				163,877
Commercial real estate			1,040,562				1,043,820				1,001,315				989,468				948,428
Commercial			469,055				456,099				428,599				412,911				419,349
Consumer finance			16,680				17,251				16,690				15,679				16,281
Home equity and improvement			118,429				118,165				116,685				116,856				116,962
Total loans			2,035,162				2,021,507				1,931,432				1,889,367				1,870,227
Less:
Undisbursed loan funds			93,355				94,552				68,850				63,267				66,902
Deferred loan origination fees			1,320				1,261				1,179				1,114				1,108
Allowance for loan loss			25,884				25,923				25,948				25,668				25,382
Net Loans		$	1,914,603			$	1,899,771			$	1,835,455			$	1,799,318			$	1,776,835
Allowance for loan loss activity
Beginning allowance		$	25,923			$	25,948			$	25,668			$	25,382			$	25,209
Provision for loan losses			(149	)			15				53				364				43
Credit loss charge-offs:
One to four family residential real estate			147				111				37				55				8
Commercial real estate			0				79				0				13				103
Commercial			234				26				18				336				0
Consumer finance			53				24				18				0				32
Home equity and improvement			98				74				66				30				10
Total charge-offs			532				314				139				434				153
Total recoveries			642				274				366				356				282
Net charge-offs (recoveries)			(110	)			40				(227	)			78				(129	)
Ending allowance		$	25,884			$	25,923			$	25,948			$	25,668			$	25,382
Credit Quality
Total non-performing loans (1)		$	14,348			$	18,198			$	16,423			$	17,707			$	16,261
Real estate owned (REO)			455				704				1,079				1,111				1,321
Total non-performing assets (2)		$	14,803			$	18,902			$	17,502			$	18,818			$	17,582
Net charge-offs (recoveries)			(110	)			40				(227	)			78				(129	)
Restructured loans, accruing (3)			10,544				9,113				9,648				11,284				11,178
Allowance for loan losses / loans			1.33	%			1.35	%			1.39	%			1.41	%			1.41	%
Allowance for loan losses / non-performing assets			174.86	%			137.14	%			148.26	%			136.40	%			144.36	%
Allowance for loan losses / non-performing loans			180.40	%			142.45	%			158.00	%			144.96	%			156.09	%
Non-performing assets / loans plus REO			0.76	%			0.98	%			0.94	%			1.03	%			0.97	%
Non-performing assets / total assets			0.60	%			0.77	%			0.73	%			0.80	%			0.77	%
Net charge-offs / average loans (annualized)			-0.02	%			0.01	%			-0.05	%			0.02	%			-0.03	%
Deposit Balances
Non-interest-bearing demand deposits		$	487,663			$	443,321			$	442,811			$	426,053			$	420,691
Interest-bearing demand deposits and money market			816,665				810,393				805,550				783,016				767,201
Savings deposits			243,369				241,016				240,316				233,546				219,655
Retail time deposits less than $250,000			400,080				399,749				399,494				401,350				403,902
Retail time deposits greater than $250,000			33,851				33,207				32,099				27,192				24,688
Total deposits		$	1,981,628			$	1,927,686			$	1,920,270			$	1,871,157			$	1,836,137

 

(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
December 31, 2016
One to four family residential real estate		$	207,550			$	203,624			$	998			$	2,928
Construction			182,886				182,886				-				-
Commercial real estate			1,040,562				1,030,833				137				9,592
Commercial			469,055				468,038				10				1,007
Consumer finance			16,680				16,438				151				91
Home equity and improvement			118,429				116,439				1,260				730
Total loans		$	2,035,162			$	2,018,258			$	2,556			$	14,348
September 30, 2016
One to four family residential real estate		$	209,097			$	205,471			$	706			$	2,920
Construction			177,075				177,075				-				-
Commercial real estate			1,043,820				1,032,260				258				11,302
Commercial			456,099				452,669				185				3,245
Consumer finance			17,251				17,048				190				13
Home equity and improvement			118,165				116,653				794				718
Total loans		$	2,021,507			$	2,001,176			$	2,133			$	18,198
December 31, 2015
One to four family residential real estate		$	205,330			$	201,806			$	914			$	2,610
Construction			163,877				163,877				-				-
Commercial real estate			948,428				937,844				736				9,848
Commercial			419,349				416,114				157				3,078
Consumer finance			16,281				16,215				30				36
Home equity and improvement			116,962				115,465				808				689
Total loans		$	1,870,227			$	1,851,321			$	2,645			$	16,261