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. ANNOUNCES 2017

SECOND QUARTER EARNINGS

 

·

Diluted earnings per share of $0.82 for 2017 second quarter, up from $0.80 in the 2016 second quarter

·

Net income of $8.3 million for 2017 second quarter, up from $7.3 million in the 2016 second quarter

·

Return on average assets of 1.15% for the 2017 second quarter compared to 1.22% in the 2016 second quarter

·

Net interest margin of 3.89% for the 2017 second quarter, up from 3.71% in the 2016 second quarter

·

Loan growth of $16.4 million during 2017 second quarter

·

Non-performing assets of $31.0 million for 2017 second quarter compared to $17.5 million for 2016 second quarter

 

DEFIANCE, OHIO (July 17, 2017) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the second quarter ended June 30, 2017, totaled $8.3 million, or $0.82 per diluted common share compared to $7.3 million or $0.80 per diluted common share for the quarter ended June 30, 2016. The second quarter 2017 includes the results from the operations of Commercial Bancshares, Inc. and its banking subsidiary Commercial Savings Bank (collectively “CSB”) following their acquisition on February 24, 2017, and Corporate One Benefits Agency, Inc. (“Corporate One”) acquired April 1, 2017. 

 

“Our second quarter financial results clearly reflect the expected operating performance enhancements from our recent acquisitions as compared to the second quarter last year revenues grew 24.3%, the net interest margin was 3.89% up from 3.71%, and the efficiency ratio improved to 59.0% from 61.5%” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “While higher charge-offs for credit losses partially offset these improvements in the second quarter, we expect the benefits from our mergers to continue elevating our ongoing performance.”

 

Net Interest Income up Compared to Second Quarter 2016

 

Net interest income of $24.6 million in the second quarter of 2017 was up from $19.4 million in the second quarter of 2016. The increase was mostly attributable to a full quarter of operations from the CSB merger, but also included recovered interest and prepayment penalties totaling $307,000 compared to $119,000 in the second quarter last year. Net interest margin was 3.89% for the second quarter of 2017, up from 3.81% in the first quarter of 2017, and up from 3.71% in the second quarter of 2016. Yield on interest earning assets increased by 23 basis points, to 4.33% in the second quarter of 2017 from 4.10% in the second quarter of 2016. The cost of interest-bearing liabilities increased by 7 basis points in the second quarter of 2017 to 0.58% from 0.51% in the second quarter of 2016.

 

 

“Strong growth in our net interest income was driven by the successful Commercial Bancshares merger, our solid organic growth over the last year and our steady net interest margin,” said Hileman. “The combination of these factors generated net interest income growth of $5.2 million or 27.0% over the second quarter last year.”

 

Non-Interest Income up from Second Quarter 2016

 

First Defiance’s non-interest income for the second quarter of 2017 was $10.1 million compared with $8.6 million in the second quarter of 2016. The increase in total non-interest income was largely due to the inclusion of operations from the CSB and Corporate One mergers completed in 2017. In addition, the second quarter of 2017 included gains of $267,000 from the sale of securities compared to gains of $227,000 in the second quarter of 2016.

 

Mortgage banking income was $1.8 million in the second quarter of 2017, even with $1.8 million in the second quarter of 2016. Mortgage originations totaled $64.2 million in the second quarter of 2017, up seasonally from the first quarter of 2017 but down from $76.0 million in the same quarter last year. Gains from the sale of mortgage loans decreased in the second quarter of 2017 to $1.3 million from $1.4 million in the second quarter of 2016. Mortgage loan servicing revenue was $924,000 in the second quarter of 2017, up slightly from $876,000 in the second quarter of 2016. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $16,000 in the second quarter of 2017 compared with a negative adjustment of $104,000 in the second quarter of 2016. In addition, gains on the sale of non-mortgages, which include SBA and FSA loans, totaled $90,000 in the second quarter 2017 compared to $411,000 in the second quarter 2016.

 

For the second quarter of 2017, commissions from the sale of insurance products were $3.3 million, up from $2.5 million in the second quarter of 2016 primarily due to added commissions from the Corporate One merger. Service fees and other charges were $3.2 million in the second quarter of 2017, up from $2.8 million in the second quarter of 2016. Trust income was $464,000 in the second quarter of 2017, up 13.4% from $409,000 in the second quarter of 2016. Other non-interest income was $612,000 in the second quarter of 2017, up from $231,000 in the second quarter of 2016 mainly due to gains from the sale of real estate owned and sales of investments.

 

“Non-interest income growth this quarter reflects our expanding operations and the contributions from our recent mergers. Insurance commissions and bank service fees had strong gains compared to the second quarter last year, more than offsetting the decline in the gain on sale of non-mortgage loans,” continued Hileman. “Overall total non-interest income, excluding securities gains, increased 18.3% over this same period in the prior year.”

 

 

Non-Interest Expenses up from Second Quarter 2016

 

Total non-interest expense was $20.6 million in the second quarter of 2017, an increase from $17.3 million in the second quarter of 2016. The increase in non-interest expenses was mostly due to the additional expenses for the operations of CSB and Corporate One mergers completed in 2017. Compensation and benefits increased to $11.5 million in the second quarter of 2017, compared to $9.8 million in the second quarter of 2016. Both occupancy expense and data processing equaled $2.0 million, up from $1.8 million and $1.6 million, respectively, in the second quarter of 2016. Other non-interest expense of $4.0 million in the second quarter of 2017 was up from $3.2 million in the second quarter of 2016, which included $299,000 of merger related transaction costs recorded in the second quarter of 2017.

 

Credit Quality

 

Non-performing loans totaled $30.4 million at June 30, 2017, an increase from $16.4 million at June 30, 2016. The increase was mainly attributable to two loan relationships totaling $13.6 million that were downgraded in the second quarter. In addition, First Defiance had $672,000 of real estate owned at June 30, 2017, compared to $1.1 million at June 30, 2016. Accruing troubled debt restructured loans were $10.5 million at June 30, 2017, compared with $9.6 million at June 30, 2016.

 

As a result of the loan downgrades, the second quarter 2017 results include net charge-offs of $2.0 million and a provision for loan losses of $2.1 million compared with net recoveries $227,000 and a provision of $53,000 for the same period in 2016.

 

The allowance for loan loss as a percentage of total loans was 1.15% at June 30, 2017, compared with 1.15% at March 31, 2017 and 1.39% at June 30, 2016. The decrease in the allowance for loan loss as a percentage of total loans was primarily attributable to the CSB acquisition. The CSB loans acquired were recorded at fair value with purchase accounting adjustments discounting the loan balance instead of an allowance for loan losses. For the CSB loans acquired, the discount recorded totaled $5.0 million, or 1.7% of acquired CSB loans at June 30, 2017.

 

“We were very disappointed in the loan downgrades and the rise in non-performing loan totals this quarter,” said Hileman. “After closely reviewing these situations, we remain confident in our lending and credit management practices. We believe that our overall asset quality is sound and that we will regain our improved position in the quarters ahead.”

 

Year-To-Date Results

 

For the six-month period ended June 30, 2017, net income totaled $13.5 million, or $1.37 per diluted common share, compared to $14.4 million, or $1.59 per diluted common share for the six months ended June 30, 2016. The first six months of 2017 includes the results from the operations of the CSB acquisition completed on February 24, 2017 and Corporate One acquired on April 1, 2017. In addition, the first six months of 2017 includes merger and conversion expenses related to the acquisitions of $3.9 million, which had an after tax impact of $2.8 million, or $0.28 per diluted share.

 

Net interest income was $46.3 million for the first six months of 2017 compared with $38.6 million in the first six months of 2016. Average interest-earning assets increased to $2.47 billion in the first six months of 2017 compared to $2.13 billion in the first six months of 2016. Net interest margin for the first six months of 2017 was 3.86%, up 11 basis points from the 3.75% margin reported in the six month period ended June 30, 2016.

 

 

The provision for loan losses in the first six months of 2017 was $2.2 million compared to $417,000 recorded during the first six months of 2016.

 

Non-interest income for the first six months of 2017 was $20.7 million compared to $17.2 million during the same period of 2016. The first six months of 2017 includes the operating results from the CSB and Corporate One mergers completed in 2017 and a $1.5 million enhancement value gain related to the purchase of bank owned life insurance in the first quarter of 2017.

 

Service fees and other charges were $5.9 million for the first six months of 2017, up from $5.4 million during the same period of 2016. Mortgage banking income was $3.6 million for the first six months of 2017 compared with $3.3 million during the same period of 2016. Insurance commissions rose to $6.8 million for the first six months of 2017 compared with $5.6 million for the same period of 2016. Non-interest income for the first six months of 2017 included $267,000 of gains from the sale of securities compared with securities gains of $358,000 during the same period of 2016.

 

Non-interest expense was $43.8 million for the first six months of 2017, up from $34.6 million for the same period of 2016. Compensation and benefits expense was $25.8 million for the first six months of 2017 compared with $20.0 million during the same period of 2016. Expenses also included increases in occupancy of $178,000, data processing of $857,000, amortization of intangibles of $263,000 and other expenses of $1.9 million.

 

Total Assets at $2.9 Billion

 

Total assets at June 30, 2017, were $2.89 billion compared to $2.48 billion at December 31, 2016, and $2.41 billion at June 30, 2016. The increase reflected at June 30, 2017 is primarily due to the acquisition of CSB effective February 24, 2017, which added $368.3 million to total assets, net of $12.3 million paid in cash, at consummation.

 

Net loans receivable (excluding loans held for sale) were $2.23 billion at June 30, 2017, compared to $1.91 billion at December 31, 2016, and $1.86 billion at June 30, 2016. The acquisition of CSB added $285.4 million to the loan portfolio. At June 30, 2017, excluding the CSB acquired loans, net loans receivable grew $107.3 million, or 5.8% from a year ago.

 

Also, at June 30, 2017, goodwill and other intangible assets totaled $104.5 million compared to $63.1 million at December 31, 2016, and $63.4 million at June 30, 2016. The increase in 2017 was attributable to the acquisitions of CSB and Corporate One which together added $41.9 to goodwill and intangibles.

 

Total deposits at June 30, 2017, were $2.33 billion compared with $1.98 billion at December 31, 2016, and $1.92 billion at June 30, 2016. The acquisition of CSB added $308.0 million to total deposits. At June 30, 2017, excluding the CSB acquired deposits, total deposits grew $98.4 million, or 5.1% from a year ago.

 

Total stockholders’ equity was $361.4 million at June 30, 2017, compared to $293.0 million at December 31, 2016, and $286.6 million at June 30, 2016. The acquisition of CSB in 2017 added $56.5 million to total equity.

 

 

Dividend to be Paid August 25

 

The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable August 25, 2017, to shareholders of record at the close of business on August 18, 2017. The dividend represents an annual dividend of 1.90 percent based on the First Defiance common stock closing price on July 14, 2017. First Defiance has approximately 10,148,821 common shares outstanding.

 

Conference Call

 

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, July 18, 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/fdef170718.html.

 

The replay of the conference call Webcast will be available at www.fdef.com until July 18, 2018, at 9:00 a.m. ET.

 

First Defiance Financial Corp.

 

First Defiance Financial Corp. (NASDAQ:FDEF), headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest, First Insurance Group and Corporate One Benefits. First Federal Bank operates 42 full-service branches and numerous ATM locations in northwest and central Ohio, southeast Michigan and northeast Indiana. First Insurance Group, including its division Corporate One Benefits, is a full-service insurance agency with ten 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 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, 2016. 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 June 30, 2017 consolidated financial statements as part of its Quarterly Report on Form 10-Q 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.

 

		June 30,				December 31,
(in thousands)		2017				2016
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	51,941			$	53,003
Interest-bearing deposits			60,000				46,000
			111,941				99,003
Securities
Available-for sale, carried at fair value			257,575				250,992
Held-to-maturity, carried at amortized cost			733				184
			258,308				251,176
Loans			2,254,435				1,940,487
Allowance for loan losses			(25,915	)			(25,884	)
Loans, net			2,228,520				1,914,603
Loans held for sale			7,939				9,607
Mortgage servicing rights			9,680				9,595
Accrued interest receivable			8,376				6,760
Federal Home Loan Bank stock			15,992				13,798
Bank Owned Life Insurance			65,390				52,817
Office properties and equipment			42,588				36,958
Real estate and other assets held for sale			672				455
Goodwill			98,065				61,798
Core deposit and other intangibles			6,425				1,336
Deferred Taxes			-				2,212
Other assets			36,045				17,479
Total Assets		$	2,889,941			$	2,477,597
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	520,778			$	487,663
Interest-bearing deposits			1,805,924				1,493,965
Total deposits			2,326,702				1,981,628
Advances from Federal Home Loan Bank			104,830				103,943
Notes payable and other interest-bearing liabilities			30,606				31,816
Subordinated debentures			36,083				36,083
Advance payments by borrowers for tax and insurance			2,305				2,650
Deferred taxes			21				-
Other liabilities			27,964				28,459
Total Liabilities			2,528,511				2,184,579
Stockholders’ Equity
Preferred stock			-				-
Common stock, net			127				127
Additional paid-in-capital			160,404				126,390
Accumulated other comprehensive income			2,745				215
Retained earnings			249,196				240,592
Treasury stock, at cost			(51,042	)			(74,306	)
Total stockholders’ equity			361,430				293,018
Total Liabilities and Stockholders’ Equity		$	2,889,941			$	2,477,597

 

 

Consolidated Statements of Income (Unaudited)

First Defiance Financial Corp.

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands, except per share amounts)		2017				2016				2017				2016
Interest Income:
Loans		$	25,318			$	19,666			$	47,288			$	38,978
Investment securities			1,752				1,543				3,507				3,173
Interest-bearing deposits			201				134				346				183
FHLB stock dividends			187				137				353				276
Total interest income			27,458				21,480				51,494				42,610
Interest Expense:
Deposits			2,170				1,545				3,966				2,978
FHLB advances and other			414				321				780				618
Subordinated debentures			229				182				443				357
Notes Payable			13				36				28				73
Total interest expense			2,826				2,084				5,217				4,026
Net interest income			24,632				19,396				46,277				38,584
Provision for loan losses			2,118				53				2,172				417
Net interest income after provision for loan losses			22,514				19,343				44,105				38,167
Non-interest Income:
Service fees and other charges			3,161				2,799				5,920				5,443
Mortgage banking income			1,830				1,764				3,568				3,303
Gain on sale of non-mortgage loans			90				411				90				456
Gain on sale of securities			267				227				267				358
Insurance commissions			3,294				2,504				6,752				5,640
Trust income			464				409				914				836
Income from Bank Owned Life Insurance			422				230				2,245				461
Other non-interest income			612				231				933				714
Total Non-interest Income			10,140				8,575				20,689				17,211
Non-interest Expense:
Compensation and benefits			11,473				9,770				25,808				19,955
Occupancy			1,954				1,828				3,791				3,613
FDIC insurance premium			353				329				643				656
Financial institutions tax			535				447				1,014				893
Data processing			2,019				1,641				3,958				3,101
Amortization of intangibles			334				147				567				304
Other non-interest expense			3,962				3,185				7,991				6,099
Total Non-interest Expense			20,630				17,347				43,772				34,621
Income before income taxes			12,024				10,571				21,022				20,757
Income taxes			3,677				3,307				7,534				6,324
Net Income		$	8,347			$	7,264			$	13,488			$	14,433
Earnings per common share:
Basic		$	0.82			$	0.81			$	1.38			$	1.61
Diluted		$	0.82			$	0.80			$	1.37			$	1.59
Average Shares Outstanding:
Basic			10,147				8,968				9,793				8,981
Diluted			10,204				9,036				9,849				9,050

 

 

Financial Summary and Comparison (Unaudited)

First Defiance Financial Corp.

 

		Three Months Ended												Six Months Ended
		June 30,												June 30,
(dollars in thousands, except per share data)		2017				2016				% change				2017				2016				% change
Summary of Operations
Tax-equivalent interest income (1)		$	27,944			$	21,940				27.4	%		$	52,450			$	43,545				20.5	%
Interest expense			2,826				2,084				35.6				5,217				4,026				29.6
Tax-equivalent net interest income (1)			25,118				19,856				26.5				47,233				39,519				19.5
Provision for loan losses			2,118				53				NM				2,172				417				NM
Tax-equivalent NII after provision for loan loss (1)			23,000				19,803				16.1				45,061				39,102				15.2
Investment Securities gains			267				227				NM				267				358				NM
Non-interest income (excluding securities gains/losses)			9,873				8,348				18.3				20,422				16,853				21.2
Non-interest expense			20,630				17,347				18.9				43,772				34,621				26.4
Income taxes			3,677				3,307				11.2				7,534				6,324				19.1
Net Income			8,347				7,264				14.9				13,488				14,433				(6.5	)
Tax equivalent adjustment (1)			486				460				5.7				956				935				2.2
At Period End
Assets			2,889,941				2,409,599				19.9
Earning assets			2,596,674				2,200,517				18.0
Loans			2,254,435				1,861,403				21.1
Allowance for loan losses			25,915				25,948				(0.1	)
Deposits			2,326,702				1,920,270				21.2
Stockholders’ equity			361,430				286,616				26.1
Average Balances
Assets			2,908,483				2,391,064				21.6				2,765,443				2,352,634				17.5
Earning assets			2,591,397				2,162,574				19.8				2,473,471				2,125,573				16.4
Loans			2,238,061				1,828,984				22.4				2,132,064				1,812,592				17.6
Deposits and interest-bearing liabilities			2,516,024				2,079,442				21.0				2,395,874				2,042,429				17.3
Deposits			2,346,336				1,903,139				23.3				2,227,986				1,869,242				19.2
Stockholders’ equity			357,523				282,573				26.5				335,983				280,812				19.6
Stockholders’ equity / assets			12.29	%			11.82	%			4.0				12.15	%			11.94	%			1.8
Per Common Share Data
Net Income
Basic		$	0.82			$	0.81				1.2			$	1.38			$	1.61				(14.3	)
Diluted			0.82				0.80				2.5				1.37				1.59				(13.8	)
Dividends			0.25				0.22				13.6				0.50				0.44				13.6
Market Value:
High		$	56.90			$	41.21				38.1			$	56.90			$	41.21				38.1
Low			48.78				37.53				30.0				46.27				34.80				33.0
Close			52.68				38.85				35.6				52.68				38.85				35.6
Common Book Value			35.61				31.95				11.5				35.61				31.95				11.5
Tangible Common Book Value (1)			25.32				24.89				1.7				25.32				24.89				1.7
Shares outstanding, end of period (000)			10,149				8,971				13.1				10,149				8,971				13.1
Performance Ratios (annualized)
Tax-equivalent net interest margin (2)			3.89	%			3.71	%			5.0				3.86	%			3.75	%			2.7
Return on average assets			1.15	%			1.22	%			(5.8	)			0.98	%			1.23	%			(20.3	)
Return on average equity			9.36	%			10.34	%			(9.4	)			8.10	%			10.34	%			(21.7	)
Efficiency ratio (3)			58.96	%			61.51	%			(4.1	)			64.70	%			61.42	%			5.3
Effective tax rate			30.58	%			31.28	%			(2.2	)			35.84	%			30.47	%			17.6
Dividend payout ratio (basic)			30.49	%			27.16	%			12.3				36.23	%			27.33	%			32.6

 

(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								Six Months Ended
		June 30,								June 30,
(dollars in thousands)		2017				2016				2017				2016
Gain from sale of mortgage loans		$	1,293			$	1,426			$	2,377			$	2,420
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			924				876				1,858				1,753
Amortization of mortgage servicing rights			(403	)			(434	)			(715	)			(745	)
Mortgage servicing rights valuation adjustments			16				(104	)			48				(125	)
			537				338				1,191				883
Total revenue from sale and servicing of mortgage loans		$	1,830			$	1,764			$	3,568			$	3,303

 

 

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended June 30,
		(dollars in thousands)
		2017												2016
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	2,238,061			$	25,368				4.55	%		$	1,828,984			$	19,716				4.34	%
Securities			259,619				2,188				3.42	%(3)			224,494				1,953				3.62	%(3)
Interest Bearing Deposits			77,725				201				1.04	%			95,296				134				0.57	%
FHLB stock			15,992				187				4.69	%			13,800				137				3.99	%
Total interest-earning assets			2,591,397				27,944				4.33	%			2,162,574				21,940				4.10	%
Non-interest-earning assets			317,086												228,490
Total assets		$	2,908,483											$	2,391,064
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,785,895			$	2,170				0.49	%		$	1,463,086			$	1,545				0.42	%
FHLB advances and other			104,923				414				1.58	%			84,506				321				1.53	%
Subordinated debentures			36,156				229				2.54	%			36,141				182				2.03	%
Notes payable			28,609				13				0.18	%			55,656				36				0.26	%
Total interest-bearing liabilities			1,955,583				2,826				0.58	%			1,639,389				2,084				0.51	%
Non-interest bearing deposits			560,441				-				-				440,053				-				-
Total including non-interest-bearing demand deposits			2,516,024				2,826				0.45	%			2,079,442				2,084				0.40	%
Other non-interest-bearing liabilities			34,936												29,049
Total liabilities			2,550,960												2,108,491
Stockholders' equity			357,523												282,573
Total liabilities and stockholders' equity		$	2,908,483											$	2,391,064
Net interest income; interest rate spread						$	25,118				3.75	%						$	19,856				3.59	%
Net interest margin (4)											3.89	%											3.71	%
Average interest-earning assets to average interest bearing liabilities											133	%											132	%

 

		Six Months Ended June 30,
		2017												2016
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	2,132,064			$	47,390				4.48	%		$	1,812,592			$	39,079				4.34	%
Securities			257,230				4,361				3.46	%(3)			229,154				4,007				3.64	%(3)
Interest Bearing Deposits			68,904				346				1.01	%			70,026				183				0.53	%
FHLB stock			15,273				353				4.66	%			13,801				276				4.02	%
Total interest-earning assets			2,473,471				52,450				4.28	%			2,125,573				43,545				4.13	%
Non-interest-earning assets			291,972												227,061
Total assets		$	2,765,443											$	2,352,634
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,706,318			$	3,966				0.47	%		$	1,441,783			$	2,978				0.42	%
FHLB advances and other			104,600				780				1.50	%			81,598				618				1.52	%
Subordinated debentures			36,153				443				2.46	%			36,140				357				2.00	%
Notes payable			27,135				28				0.21	%			55,449				73				0.27	%
Total interest-bearing liabilities			1,874,206				5,217				0.56	%			1,614,970				4,026				0.50	%
Non-interest bearing deposits			521,668				-				-				427,459				-				-
Total including non-interest-bearing demand deposits			2,395,874				5,217				0.44	%			2,042,429				4,026				0.40	%
Other non-interest-bearing liabilities			33,586												29,393
Total liabilities			2,429,460												2,071,822
Stockholders' equity			335,983												280,812
Total liabilities and stockholders' equity		$	2,765,443											$	2,352,634
Net interest income; interest rate spread						$	47,233				3.72	%						$	39,519				3.63	%
Net interest margin (4)											3.86	%											3.75	%
Average interest-earning assets to average interest bearing liabilities											132	%											132	%

 

(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)		2nd Qtr 2017				1st Qtr 2017				4th Qtr 2016				3rd Qtr 2016				2nd Qtr 2016
Summary of Operations
Tax-equivalent interest income (1)		$	27,944			$	24,505			$	23,219			$	22,449			$	21,940
Interest expense			2,826				2,391				2,231				2,183				2,084
Tax-equivalent net interest income (1)			25,118				22,114				20,988				20,266				19,856
Provision for loan losses			2,118				55				(149	)			15				53
Tax-equivalent NII after provision for loan losses (1)			23,000				22,059				21,137				20,251				19,803
Investment securities gains, net of impairment			267				-				-				151				227
Non-interest income (excluding securities gains/losses)			9,873				10,549				8,293				8,375				8,348
Non-interest expense			20,630				23,142				18,180				18,292				17,347
Income taxes			3,677				3,857				3,436				2,994				3,307
Net income			8,347				5,140				7,365				7,045				7,264
Tax equivalent adjustment (1)			486				469				449				446				460
At Period End
Total assets		$	2,889,941			$	2,928,697			$	2,477,151			$	2,450,040			$	2,409,599
Earning assets			2,596,674				2,639,325				2,261,068				2,240,747				2,200,517
Loans			2,254,435				2,238,006				1,940,487				1,925,694				1,861,403
Allowance for loan losses			25,915				25,749				25,884				25,923				25,948
Deposits			2,326,702				2,373,789				1,981,628				1,927,686				1,920,270
Stockholders’ equity			361,430				354,191				293,018				292,138				286,616
Stockholders’ equity / assets			12.51	%			12.09	%			11.83	%			11.92	%			11.89	%
Goodwill			98,065				90,768				61,798				61,798				61,798
Average Balances
Total assets		$	2,908,483			$	2,622,402			$	2,458,952			$	2,425,535			$	2,391,064
Earning assets			2,591,397				2,355,544				2,226,868				2,194,170				2,162,574
Loans			2,238,061				2,026,067				1,908,731				1,879,760				1,828,984
Deposits and interest-bearing liabilities			2,516,024				2,275,724				2,133,868				2,103,054				2,079,442
Deposits			2,346,336				2,109,637				1,954,631				1,929,368				1,903,139
Stockholders’ equity			357,523				314,442				292,301				288,609				282,573
Stockholders’ equity / assets			12.29	%			11.99	%			11.89	%			11.90	%			11.82	%
Per Common Share Data
Net Income:
Basic		$	0.82			$	0.54			$	0.82			$	0.78			$	0.81
Diluted			0.82				0.54				0.81				0.78				0.80
Dividends			0.25				0.25				0.22				0.22				0.22
Market Value:
High		$	56.90			$	51.15			$	52.31			$	46.83			$	41.21
Low			48.78				46.27				36.91				35.90				37.53
Close			52.68				49.51				50.74				44.64				38.85
Common Book Value			35.61				34.92				32.62				32.53				31.95
Shares outstanding, end of period (in thousands)			10,149				10,143				8,983				8,980				8,971
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.89	%			3.81	%			3.76	%			3.69	%			3.71	%
Return on average assets			1.15	%			0.79	%			1.19	%			1.16	%			1.22	%
Return on average equity			9.36	%			6.63	%			10.02	%			9.71	%			10.34	%
Efficiency ratio (2)			58.96	%			70.85	%			62.09	%			63.87	%			61.51	%
Effective tax rate			30.58	%			42.87	%			31.81	%			29.82	%			31.28	%
Common dividend payout ratio (basic)			30.49	%			46.30	%			26.83	%			28.21	%			27.16	%

(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)		2nd Qtr 2017				1st Qtr 2017				4th Qtr 2016				3rd Qtr 2016				2nd Qtr 2016
Loan Portfolio Composition
One to four family residential real estate		$	276,578			$	276,931			$	207,550			$	209,097			$	206,861
Construction			234,688				199,724				182,886				177,075				161,282
Commercial real estate			1,182,087				1,193,906				1,040,562				1,043,820				1,001,315
Commercial			515,004				504,366				469,055				456,099				428,599
Consumer finance			28,860				27,696				16,680				17,251				16,690
Home equity and improvement			130,429				132,965				118,429				118,165				116,685
Total loans			2,367,646				2,335,588				2,035,162				2,021,507				1,931,432
Less:
Undisbursed loan funds			112,000				95,460				93,355				94,552				68,850
Deferred loan origination fees			1,211				1,264				1,320				1,261				1,179
Allowance for loan loss			25,915				25,749				25,884				25,923				25,948
Net Loans		$	2,228,520			$	2,213,115			$	1,914,603			$	1,899,771			$	1,835,455
Allowance for loan loss activity
Beginning allowance		$	25,749			$	25,884			$	25,923			$	25,948			$	25,668
Provision for loan losses			2,118				55				(149	)			15				53
Credit loss charge-offs:
One to four family residential real estate			-				49				147				111				37
Commercial real estate			110				290				0				79				0
Commercial			2,027				-				234				26				18
Consumer finance			21				71				53				24				18
Home equity and improvement			100				54				98				74				66
Total charge-offs			2,258				464				532				314				139
Total recoveries			306				274				642				274				366
Net charge-offs (recoveries)			1,952				190				(110	)			40				(227	)
Ending allowance		$	25,915			$	25,749			$	25,884			$	25,923			$	25,948
Credit Quality
Total non-performing loans (1)		$	30,359			$	15,057			$	14,348			$	18,198			$	16,423
Real estate owned (REO)			672				705				455				704				1,079
Total non-performing assets (2)		$	31,031			$	15,762			$	14,803			$	18,902			$	17,502
Net charge-offs (recoveries)			1,952				190				(110	)			40				(227	)
Restructured loans, accruing (3)			10,521				9,814				10,544				9,113				9,648
Allowance for loan losses / loans			1.15	%			1.15	%			1.33	%			1.35	%			1.39	%
Allowance for loan losses / non-performing assets			83.51	%			163.36	%			174.86	%			137.14	%			148.26	%
Allowance for loan losses / non-performing loans			85.36	%			171.01	%			180.40	%			142.45	%			158.00	%
Non-performing assets / loans plus REO			1.38	%			0.70	%			0.76	%			0.98	%			0.94	%
Non-performing assets / total assets			1.07	%			0.54	%			0.60	%			0.77	%			0.73	%
Net charge-offs / average loans (annualized)			0.35	%			0.04	%			-0.02	%			0.01	%			-0.05	%
Deposit Balances
Non-interest-bearing demand deposits		$	520,778			$	579,943			$	487,663			$	443,321			$	442,811
Interest-bearing demand deposits and money market			967,834				973,459				816,665				810,393				805,550
Savings deposits			288,643				288,498				243,369				241,016				240,316
Retail time deposits less than $250,000			499,298				490,953				400,080				399,749				399,494
Retail time deposits greater than $250,000			50,149				40,936				33,851				33,207				32,099
Total deposits		$	2,326,702			$	2,373,789			$	1,981,628			$	1,927,686			$	1,920,270

 

(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
June 30, 2017
One to four family residential real estate		$	276,578			$	270,729			$	2,710			$	3,139
Construction			234,688				234,445				-				243
Commercial real estate			1,182,087				1,161,810				1,370				18,907
Commercial			515,004				506,996				545				7,463
Consumer finance			28,860				28,594				215				51
Home equity and improvement			130,429				128,668				1,205				556
Total loans		$	2,367,646			$	2,331,242			$	6,045			$	30,359
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
June 30, 2016
One to four family residential real estate		$	206,861			$	203,534			$	619			$	2,708
Construction			161,282				161,282				-				-
Commercial real estate			1,001,315				988,342				2,174				10,799
Commercial			428,599				424,107				2,269				2,223
Consumer finance			16,690				16,629				45				16
Home equity and improvement			116,685				115,376				632				677
Total loans		$	1,931,432			$	1,909,270			$	5,739			$	16,423