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 2018

THIRD QUARTER EARNINGS

 

·

Diluted earnings per share of $0.55 for the 2018 third quarter, up from $0.46 in the 2017 third quarter

·

Net income of $11.3 million for the 2018 third quarter, up from $9.4 million in the 2017 third quarter

·

Return on average assets of 1.47% for the 2018 third quarter, up from 1.28% in the 2017 third quarter

·

Net interest margin of 4.00% for the 2018 third quarter, up from 3.91% in the 2017 third quarter

·

Loan growth of $71.0 million during the 2018 third quarter

·

Deposit growth of $35.3 million during the 2018 third quarter

·

Non-performing assets of $22.6 million for the 2018 third quarter, compared to $29.7 million for 2017 third quarter

 

DEFIANCE, OHIO (October 15, 2018) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the third quarter ended September 30, 2018, totaled $11.3 million, or $0.55 per diluted common share compared to $9.4 million or $0.46 per diluted common share for the quarter ended September 30, 2017.

 

“Our third quarter results reflect the continued high financial performance of our company,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “Our ability to grow our balance sheet and maintain strong profitability delivered excellent results for our shareholders, with earnings per share up 19.6% from the third quarter last year.”

 

Net Interest Income up Compared to Third Quarter 2017

 

Net interest income of $27.5 million in the third quarter of 2018 was up from $25.0 million in the third quarter of 2017. The increase was primarily due to the growth in earning assets supplemented by expansion in the net interest margin versus the third quarter last year. The net interest margin was 4.00% for the third quarter of 2018, up from 3.95% in the second quarter of 2018, and up from 3.91% in the third quarter of 2017. Yield on interest earning assets increased by 25 basis points, to 4.63% in the third quarter of 2018 from 4.38% in the third quarter of 2017. The cost of interest-bearing liabilities increased by 24 basis points in the third quarter of 2018 to 0.85% from 0.61% in the third quarter of 2017.

 

 

“Our solid growth in loans and core deposits continued to fuel our net interest margin and generate strong growth in net interest income,” said Hileman. “Commercial loan demand was particularly robust and led to total loan growth of $71.0 million, or 11.9% annualized, while deposits grew $35.3 million, or 5.7% annualized. This growth combined with a healthy net interest margin for the quarter produced a strong increase in our net interest income, which is up 10.1% over the third quarter last year.”

 

Non-Interest Income up from Third Quarter 2017

 

First Defiance’s non-interest income for the third quarter of 2018 was $9.9 million compared with $9.5 million in the third quarter of 2017. The third quarter of 2018 included gains of $76,000 from the sale of securities compared to gains of $158,000 in the third quarter of 2017.

 

Mortgage banking income was $1.9 million in the third quarter of 2018, up from $1.7 million in the third quarter of 2017. Mortgage originations totaled $74.0 million in the third quarter of 2018 compared to $71.8 million in the same quarter last year. As a result of the higher volumes, gains from the sale of mortgage loans increased in the third quarter of 2018 to $1.3 million from $1.2 million in the third quarter of 2017. Mortgage loan servicing revenue was $929,000 in the third quarter of 2018, up from $911,000 in the third quarter of 2017 and amortization of mortgage servicing rights declined to $340,000 from $386,000 in the third quarter last year.

 

For the third quarter of 2018, commissions from the sale of insurance products were $3.3 million, up from $3.1 million in the third quarter of 2017. Service fees and other charges were $3.3 million in the third quarter of 2018, up from $3.2 million in the third quarter of 2017. Trust income was $514,000 in the third quarter of 2018, up from $486,000 in the third quarter of 2017.

 

“Our key business lines drove our 5.5% growth in non-interest income, excluding securities gains, over the third quarter last year,” said Hileman. “When compared to the same period last year, mortgage banking revenues grew 10.5%, insurance commissions were up 5.6% and trust revenues rose 5.8%.”

 

Non-Interest Expenses up from Third Quarter 2017

 

Total non-interest expense was $22.3 million in the third quarter of 2018, an increase from $20.4 million in the third quarter of 2017. Compensation and benefits increased to $12.9 million in the third quarter of 2018, compared to $11.8 million in the third quarter of 2017. Occupancy expense and data processing expense were both $2.2 million in the third quarter of 2018, up from $2.0 million and $1.9 million, respectively, in the third quarter of 2017. Other non-interest expense of $4.0 million in the third quarter of 2018 was up from $3.7 million in the third quarter of 2017.

 

Credit Quality

 

Non-performing loans totaled $20.9 million at September 30, 2018, a decrease from $29.2 million at September 30, 2017. In addition, First Defiance had $1.7 million of real estate owned at September 30, 2018, compared to $532,000 at September 30, 2017. Accruing troubled debt restructured loans were $12.6 million at September 30, 2018, compared with $13.0 million at September 30, 2017.

 

The third quarter 2018 results include net charge-offs of $1.1 million and a provision for loan losses of $1.4 million compared with net charge-offs of $36,000 and a provision of $462,000 for the same period in 2017.

 

 

The allowance for loan loss as a percentage of total loans was 1.13% at September 30, 2018, compared with 1.15% at June 30, 2018, and 1.16% at September 30, 2017.

 

“Our credit quality metrics remained strong and steady in the third quarter and showed improvement from a year ago,” said Hileman. “Total non-performing assets including troubled debt restructurings declined 17.6% from last year. Our allowance for loan losses coverage of nonaccrual loans was 132% at the end of the third quarter.”

 

Year-To-Date Results

 

For the nine-month period ended September 30, 2018, net income totaled $34.2 million, or $1.67 per diluted common share, compared to $22.9 million, or $1.15 per diluted common share for the nine months ended September 30, 2017. The first nine months of 2017 included approximately seven months of operations of the Commercial Savings Bank (“CSB”) acquisition completed on February 24, 2017, and six months of operations from Corporate One acquired on April 1, 2017. In comparison, the first nine months of 2018 results fully include the operations from both CSB and Corporate One. In addition, the first nine 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 $79.8 million for the first nine months of 2018 compared with $71.3 million in the first nine months of 2017. Average interest-earning assets increased to $2.71 billion in the first nine months of 2018 compared to $2.51 billion in the first nine months of 2017. Net interest margin for the first nine months of 2018 was 3.97%, up 9 basis points from the 3.88% margin reported in the nine month period ended September 30, 2017.

 

The provision for loan losses in the first nine months of 2018 was $704,000 compared to $2.6 million recorded during the first nine months of 2017.

 

Non-interest income for the first nine months of 2018 was $30.8 million compared to $30.2 million during the same period of 2017. The first nine months of 2017 included 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 $9.8 million for the first nine months of 2018, up from $9.1 million during the same period of 2017. Mortgage banking income was $5.6 million for the first nine months of 2018 compared with $5.3 million during the same period of 2017. Insurance commissions rose to $11.0 million for the first nine months of 2018 compared with $9.8 million for the same period of 2017. Non-interest income for the first nine months of 2018 included $76,000 of gains from the sale of securities compared with securities gains of $425,000 during the same period of 2017.

 

Non-interest expense was $68.2 million for the first nine months of 2018, up from $64.2 million for the same period of 2017. Compensation and benefits expense was $39.0 million for the first nine months of 2018 compared with $37.6 million during the same period of 2017. Expenses also included increases in occupancy of $500,000, data processing of $517,000 and other expenses of $1.5 million.

 

 

Total Assets at $3.10 Billion

 

Total assets at September 30, 2018, were $3.10 billion compared to $2.99 billion at December 31, 2017, and $2.93 billion at September 30, 2017.

 

Net loans receivable (excluding loans held for sale) were $2.43 billion at September 30, 2018, compared to $2.32 billion at December 31, 2017, and $2.25 billion at September 30, 2017. Also, at September 30, 2018, goodwill and other intangible assets totaled $103.3 million compared to $104.3 million at December 31, 2017, and $104.4 million at September 30, 2017. Total deposits at September 30, 2018, were $2.52 billion compared with $2.44 billion at December 31, 2017, and $2.36 billion at September 30, 2017.

 

Total stockholders’ equity was $393.5 million at September 30, 2018, compared to $373.3 million at December 31, 2017, and $367.9 million at September 30, 2017.

 

Dividend to be Paid November 16

 

The Board of Directors declared a quarterly cash dividend of $0.17 per common share payable November 16, 2018, to shareholders of record at the close of business on November 9, 2018. The dividend represents an annual dividend of 2.52 percent based on the First Defiance common stock closing price on October 12, 2018. First Defiance has approximately 20,401,460 common shares outstanding.

 

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, October 16, 2018, 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 https://services.choruscall.com/links/fdef181016.html.

 

The replay of the conference call webcast will be available at www.fdef.com until October 16, 2019, 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 and First Insurance Group. First Federal Bank operates 44 full-service branches and numerous ATM locations in northwest and central Ohio, southeast Michigan and northeast Indiana and a loan production office in Ann Arbor, Michigan. First Insurance Group is a full-service insurance agency with nine 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, 2017. 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 September 30, 2018 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.

 

		September 30,				December 31,
(in thousands)		2018				2017
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	55,526			$	58,693
Interest-bearing deposits			44,000				55,000
			99,526				113,693
Securities
Available-for sale, carried at fair value			282,962				260,650
Held-to-maturity, carried at amortized cost			603				648
			283,565				261,298
Loans			2,456,357				2,348,713
Allowance for loan losses			(27,639	)			(26,683	)
Loans, net			2,428,718				2,322,030
Loans held for sale			12,485				10,435
Mortgage servicing rights			10,054				9,808
Accrued interest receivable			11,258				8,706
Federal Home Loan Bank stock			14,217				15,992
Bank Owned Life Insurance			67,259				66,230
Office properties and equipment			40,413				40,217
Real estate and other assets held for sale			1,676				1,532
Goodwill			98,569				98,569
Core deposit and other intangibles			4,705				5,703
Deferred taxes			1,353				231
Other assets			24,295				38,959
Total Assets		$	3,098,093			$	2,993,403
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	556,316			$	571,360
Interest-bearing deposits			1,968,115				1,866,296
Total deposits			2,524,431				2,437,656
Advances from Federal Home Loan Bank			100,222				84,279
Notes payable and other interest-bearing liabilities			4,162				26,019
Subordinated debentures			36,083				36,083
Advance payments by borrowers for tax and insurance			4,561				2,925
Other liabilities			35,177				33,155
Total Liabilities			2,704,636				2,620,117
Stockholders’ Equity
Preferred stock			-				-
Common stock, net			127				127
Additional paid-in-capital			161,179				160,940
Accumulated other comprehensive income (loss)			(4,921	)			217
Retained earnings			286,960				262,900
Treasury stock, at cost			(49,888	)			(50,898	)
Total stockholders’ equity			393,457				373,286
Total Liabilities and Stockholders’ Equity		$	3,098,093			$	2,993,403

 

 

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)		2018				2017				2018				2017
Interest Income:
Loans		$	29,371			$	25,975			$	83,557			$	73,263
Investment securities			2,077				1,688				5,967				5,195
Interest-bearing deposits			275				209				945				555
FHLB stock dividends			240				209				698				562
Total interest income			31,963				28,081				91,167				79,575
Interest Expense:
Deposits			3,753				2,391				9,508				6,357
FHLB advances and other			342				431				943				1,211
Subordinated debentures			334				239				934				682
Notes Payable			5				13				19				41
Total interest expense			4,434				3,074				11,404				8,291
Net interest income			27,529				25,007				79,763				71,284
Provision for loan losses			1,376				462				704				2,635
Net interest income after provision for loan losses			26,153				24,545				79,059				68,649
Non-interest Income:
Service fees and other charges			3,335				3,153				9,762				9,073
Mortgage banking income			1,877				1,698				5,632				5,266
Gain on sale of non-mortgage loans			33				82				300				172
Gain on sale of securities			76				158				76				425
Insurance commissions			3,254				3,082				11,024				9,834
Trust income			514				486				1,588				1,400
Income from Bank Owned Life Insurance			399				421				1,365				2,666
Other non-interest income			434				415				1,092				1,348
Total Non-interest Income			9,922				9,495				30,839				30,184
Non-interest Expense:
Compensation and benefits			12,882				11,780				39,016				37,588
Occupancy			2,154				1,960				6,251				5,751
FDIC insurance premium			255				330				817				973
Financial institutions tax			531				404				1,593				1,418
Data processing			2,161				1,874				6,349				5,832
Amortization of intangibles			319				364				998				931
Other non-interest expense			3,984				3,728				13,178				11,718
Total Non-interest Expense			22,286				20,440				68,202				64,211
Income before income taxes			13,789				13,600				41,696				34,622
Income taxes			2,483				4,219				7,544				11,753
Net Income		$	11,306			$	9,381			$	34,152			$	22,869
Earnings per common share:
Basic		$	0.55			$	0.46			$	1.68			$	1.15
Diluted		$	0.55			$	0.46			$	1.67			$	1.15
Average Shares Outstanding:
Basic			20,400				20,298				20,373				19,826
Diluted			20,467				20,418				20,465				19,940

 

 

Financial Summary and Comparison (Unaudited)

First Defiance Financial Corp.

 

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
(dollars in thousands, except per share data)		2018				2017				% change				2018				2017				% change
Summary of Operations
Tax-equivalent interest income (2)		$	32,220			$	28,557				12.8	%		$	91,913			$	81,007				13.5	%
Interest expense			4,434				3,074				44.2				11,404				8,291				37.5
Tax-equivalent net interest income (2)			27,786				25,483				9.0				80,509				72,716				10.7
Provision for loan losses			1,376				462				197.8				704				2,635				(73.3	)
Tax-equivalent NII after provision for loan loss (2)			26,410				25,021				5.6				79,805				70,081				13.9
Investment securities gains			76				158				(51.9	)			76				425				(82.1	)
Non-interest income (excluding securities gains/losses)			9,846				9,337				5.5				30,763				29,759				3.4
Non-interest expense			22,286				20,440				9.0				68,202				64,211				6.2
Income taxes			2,483				4,219				(41.1	)			7,544				11,753				(35.8	)
Net Income			11,306				9,381				20.5				34,152				22,869				49.3
Tax equivalent adjustment (2)			257				476				(46.0	)			746				1,432				(47.9	)
At Period End
Assets			3,098,093				2,935,030				5.6
Earning assets			2,810,624				2,633,996				6.7
Loans			2,456,357				2,276,042				7.9
Allowance for loan losses			27,639				26,341				4.9
Deposits			2,524,431				2,360,675				6.9
Stockholders’ equity			393,457				367,924				6.9
Average Balances
Assets			3,059,225				2,906,795				5.2				3,018,632				2,812,560				7.3
Earning assets			2,754,561				2,590,463				6.3				2,710,998				2,511,469				7.9
Loans			2,403,932				2,251,071				6.8				2,352,514				2,171,733				8.3
Deposits and interest-bearing liabilities			2,633,054				2,507,805				5.0				2,599,540				2,433,185				6.8
Deposits			2,513,708				2,338,817				7.5				2,478,526				2,264,930				9.4
Stockholders’ equity			389,361				363,612				7.1				381,506				345,192				10.5
Stockholders’ equity / assets			12.73	%			12.51	%			1.7				12.64	%			12.27	%			3.0
Per Common Share Data
Net Income
Basic		$	0.55			$	0.46				19.6			$	1.68			$	1.15				46.1
Diluted			0.55				0.46				19.6				1.67				1.15				45.9
Dividends			0.17				0.125				36.0				0.47				0.375				25.3
Market Value:
High		$	35.00			$	27.00				29.7			$	35.00			$	28.45				23.0
Low			29.61				23.51				26.0				25.51				23.14				10.3
Close			30.11				26.25				14.7				30.11				26.25				14.7
Common Book Value			19.29				18.13				6.4				19.29				18.13				6.4
Tangible Common Book Value (1)			14.23				12.98				9.6				14.23				12.98				9.6
Shares outstanding, end of period (000)			20,396				20,298				0.5				20,396				20,298				0.5
Performance Ratios (annualized)
Tax-equivalent net interest margin (2)			4.00	%			3.91	%			2.2				3.97	%			3.88	%			2.3
Return on average assets			1.47	%			1.28	%			14.5				1.51	%			1.09	%			39.1
Return on average equity			11.52	%			10.24	%			12.6				11.97	%			8.86	%			35.1
Efficiency ratio (3)			59.22	%			58.70	%			0.9				61.29	%			62.66	%			(2.2	)
Effective tax rate			18.01	%			31.02	%			(42.0	)			18.09	%			33.95	%			(46.7	)
Dividend payout ratio (basic)			30.91	%			27.17	%			13.7				27.98	%			32.47	%			(13.8	)

 

(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 21% in 2018 and 35% in 2017.

(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								Nine Months Ended
		September 30,								September 30,
(dollars in thousands)		2018				2017				2018				2017
Gain from sale of mortgage loans		$	1,280			$	1,200			$	3,744			$	3,577
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			929				911				2,806				2,769
Amortization of mortgage servicing rights			(340	)			(386	)			(1,009	)			(1,101	)
Mortgage servicing rights valuation adjustments			8				(27	)			91				21
			597				498				1,888				1,689
Total revenue from sale and servicing of mortgage loans		$	1,877			$	1,698			$	5,632			$	5,266

 

 

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended September 30,
		(dollars in thousands)
		2018												2017
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	2,403,932			$	29,397				4.85	%		$	2,251,071			$	26,025				4.59	%
Securities			286,507				2,308				3.16	%(3)			259,310				2,114				3.29	%(3)
Interest Bearing Deposits			49,734				275				2.19	%			64,090				209				1.29	%
FHLB stock			14,388				240				6.62	%			15,992				209				5.18	%
Total interest-earning assets			2,754,561				32,220				4.63	%			2,590,463				28,557				4.38	%
Non-interest-earning assets			304,664												316,332
Total assets		$	3,059,225											$	2,906,795
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,955,518			$	3,753				0.76	%		$	1,818,670			$	2,391				0.52	%
FHLB advances and other			77,719				342				1.75	%			104,648				431				1.63	%
Subordinated debentures			36,196				334				3.66	%			36,158				239				2.62	%
Notes payable			5,431				5				0.37	%			28,182				13				0.18	%
Total interest-bearing liabilities			2,074,864				4,434				0.85	%			1,987,658				3,074				0.61	%
Non-interest bearing deposits			558,190				-				-				520,147				-				-
Total including non-interest-bearing demand deposits			2,633,054				4,434				0.67	%			2,507,805				3,074				0.49	%
Other non-interest-bearing liabilities			36,810												35,378
Total liabilities			2,669,864												2,543,183
Stockholders' equity			389,361												363,612
Total liabilities and stockholders' equity		$	3,059,225											$	2,906,795
Net interest income; interest rate spread						$	27,786				3.78	%						$	25,483				3.77	%
Net interest margin (4)											4.00	%											3.91	%
Average interest-earning assets  to average interest bearing liabilities											133	%											130	%
		Nine Months Ended September 30,
		2018												2017
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	2,352,514			$	83,633				4.75	%		$	2,171,733			$	73,415				4.52	%
Securities			276,745				6,637				3.21	%(3)			257,924				6,475				3.40	%(3)
Interest Bearing Deposits			66,283				945				1.91	%			66,299				555				1.12	%
FHLB stock			15,456				698				6.04	%			15,513				562				4.84	%
Total interest-earning assets			2,710,998				91,913				4.53	%			2,511,469				81,007				4.32	%
Non-interest-earning assets			307,634												301,091
Total assets		$	3,018,632											$	2,812,560
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,925,972			$	9,508				0.66	%		$	1,743,769			$	6,357				0.49	%
FHLB advances and other			74,634				943				1.69	%			104,616				1,211				1.55	%
Subordinated debentures			36,195				934				3.45	%			36,155				682				2.51	%
Notes payable			10,185				19				0.25	%			27,484				41				0.20	%
Total interest-bearing liabilities			2,046,986				11,404				0.74	%			1,912,024				8,291				0.58	%
Non-interest bearing deposits			552,554				-				-				521,161				-				-
Total including non-interest-bearing demand deposits			2,599,540				11,404				0.59	%			2,433,185				8,291				0.46	%
Other non-interest-bearing liabilities			37,586												34,183
Total liabilities			2,637,126												2,467,368
Stockholders' equity			381,506												345,192
Total liabilities and stockholders' equity		$	3,018,632											$	2,812,560
Net interest income; interest rate spread						$	80,509				3.79	%						$	72,716				3.74	%
Net interest margin (4)											3.97	%											3.88	%
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 21% in 2018 and 35% in 2017.

(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 tax equivalent 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 2018				2nd Qtr 2018				1st Qtr 2018				4th Qtr 2017				3rd Qtr 2017
Summary of Operations
Tax-equivalent interest income (1)		$	32,220			$	30,550			$	29,142			$	29,009			$	28,557
Interest expense			4,434				3,752				3,218				3,140				3,074
Tax-equivalent net interest income (1)			27,786				26,798				25,924				25,869				25,483
Provision for loan losses			1,376				423				(1,095	)			314				462
Tax-equivalent NII after provision for loan losses (1)			26,410				26,375				27,019				25,555				25,021
Investment securities gains, net of impairment			76				-				-				160				158
Non-interest income (excluding securities gains/losses)			9,846				10,214				10,703				9,737				9,337
Non-interest expense			22,286				22,665				23,251				21,141				20,440
Income taxes			2,483				2,564				2,497				4,430				4,219
Net income			11,306				11,109				11,737				9,399				9,381
Tax equivalent adjustment (1)			257				251				237				482				476
At Period End
Total assets		$	3,098,093			$	3,039,589			$	3,023,004			$	2,993,403			$	2,935,030
Earning assets			2,810,624				2,756,712				2,748,338				2,691,438				2,633,996
Loans			2,456,357				2,385,344				2,358,330				2,348,713				2,276,042
Allowance for loan losses			27,639				27,321				27,267				26,683				26,341
Deposits			2,524,431				2,489,128				2,491,801				2,437,656				2,360,675
Stockholders’ equity			393,457				386,920				379,214				373,286				367,924
Stockholders’ equity / assets			12.70	%			12.73	%			12.54	%			12.47	%			12.54	%
Goodwill			98,569				98,569				98,569				98,569				98,370
Average Balances
Total assets		$	3,059,225			$	3,018,808			$	2,977,864			$	2,968,445			$	2,906,795
Earning assets			2,754,561				2,714,328				2,664,114				2,646,643				2,590,463
Loans			2,403,932				2,337,294				2,316,316				2,279,358				2,251,071
Deposits and interest-bearing liabilities			2,633,054				2,600,029				2,565,537				2,560,258				2,507,805
Deposits			2,513,708				2,487,430				2,434,440				2,400,061				2,338,817
Stockholders’ equity			389,361				381,165				373,993				369,366				363,612
Stockholders’ equity / assets			12.73	%			12.63	%			12.56	%			12.44	%			12.51	%
Per Common Share Data
Net Income:
Basic		$	0.55			$	0.54			$	0.58			$	0.47			$	0.46
Diluted			0.55				0.54				0.58				0.46				0.46
Dividends			0.17				0.15				0.150				0.125				0.125
Market Value:
High		$	35.00			$	33.72			$	29.93			$	28.46			$	27.00
Low			29.61				27.63				25.51				25.14				23.51
Close			30.11				33.53				28.66				25.99				26.25
Common Book Value			19.29				18.97				18.62				18.38				18.13
Shares outstanding, end of period (in thousands)			20,396				20,396				20,364				20,312				20,298
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			4.00	%			3.95	%			3.95	%			3.88	%			3.91	%
Return on average assets			1.47	%			1.48	%			1.60	%			1.26	%			1.28	%
Return on average equity			11.52	%			11.69	%			12.73	%			10.10	%			10.24	%
Efficiency ratio (2)			59.22	%			61.24	%			63.48	%			59.37	%			58.70	%
Effective tax rate			18.01	%			18.75	%			17.54	%			32.03	%			31.02	%
Common dividend payout ratio (basic)			30.91	%			27.78	%			26.09	%			26.88	%			27.17	%

 

(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 21% in 2018 and 35% in 2017.

(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 2018				2nd Qtr 2018				1st Qtr 2018				4th Qtr 2017				3rd Qtr 2017
Loan Portfolio Composition
One to four family residential real estate		$	313,300			$	307,480			$	275,547			$	274,862			$	271,048
Construction			274,344				283,911				251,944				265,476				244,920
Commercial real estate			1,363,087				1,283,698				1,282,027				1,235,221				1,205,695
Commercial			489,393				489,296				500,496				526,142				510,240
Consumer finance			32,379				29,724				28,035				29,109				29,009
Home equity and improvement			129,295				129,868				133,407				135,457				132,220
Total loans			2,601,798				2,523,977				2,471,456				2,466,267				2,393,132
Less:
Undisbursed loan funds			143,286				136,563				111,450				115,972				115,714
Deferred loan origination fees			2,155				2,070				1,676				1,582				1,379
Allowance for loan loss			27,639				27,321				27,267				26,683				26,341
Net Loans		$	2,428,718			$	2,358,023			$	2,331,063			$	2,322,030			$	2,249,698
Allowance for loan loss activity
Beginning allowance		$	27,321			$	27,267			$	26,683			$	26,341			$	25,915
Provision for loan losses			1,376				423				(1,095	)			314				462
Credit loss charge-offs:
One to four family residential real estate			136				78				16				170				60
Commercial real estate			1,048				254				55				29				0
Commercial			528				84				97				210				64
Consumer finance			25				72				31				27				20
Home equity and improvement			36				41				117				55				92
Total charge-offs			1,773				529				316				491				236
Total recoveries			715				160				1,995				519				200
Net charge-offs (recoveries)			1,058				369				(1,679	)			(28	)			36
Ending allowance		$	27,639			$	27,321			$	27,267			$	26,683			$	26,341
Credit Quality
Total non-performing loans (1)		$	20,929			$	18,340			$	27,925			$	30,715			$	29,152
Real estate owned (REO)			1,676				1,795				1,440				1,532				532
Total non-performing assets (2)		$	22,605			$	20,135			$	29,365			$	32,247			$	29,684
Net charge-offs (recoveries)			1,058				369				(1,679	)			(28	)			36
Restructured loans, accruing (3)			12,611				15,834				13,722				13,770				13,044
Allowance for loan losses / loans			1.13	%			1.15	%			1.16	%			1.14	%			1.16	%
Allowance for loan losses / non-performing assets			122.27	%			135.69	%			92.86	%			82.75	%			88.74	%
Allowance for loan losses / non-performing loans			132.06	%			148.97	%			97.64	%			86.87	%			90.36	%
Non-performing assets / loans plus REO			0.92	%			0.84	%			1.24	%			1.37	%			1.30	%
Non-performing assets / total assets			0.73	%			0.66	%			0.97	%			1.08	%			1.01	%
Net charge-offs / average loans (annualized)			0.18	%			0.06	%			-0.29	%			0.00	%			0.01	%
Deposit Balances
Non-interest-bearing demand deposits		$	556,316			$	548,147			$	550,742			$	571,360			$	519,911
Interest-bearing demand deposits and money market			1,016,294				1,021,445				1,055,416				1,005,519				989,514
Savings deposits			293,359				297,870				306,510				302,022				296,230
Retail time deposits less than $250,000			564,379				547,871				512,746				504,912				504,277
Retail time deposits greater than $250,000			94,083				73,795				66,387				53,843				50,743
Total deposits		$	2,524,431			$	2,489,128			$	2,491,801			$	2,437,656			$	2,360,675

 

(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, 2018
One to four family residential real estate		$	313,300			$	308,108			$	1,680			$	3,512
Construction			274,344				274,344				-				-
Commercial real estate			1,363,087				1,351,257				138				11,692
Commercial			489,393				484,216				48				5,129
Consumer finance			32,379				32,124				221				34
Home equity and improvement			129,295				127,291				1,442				562
Total loans		$	2,601,798			$	2,577,340			$	3,529			$	20,929
December 31, 2017
One to four family residential real estate		$	274,862			$	269,624			$	2,201			$	3,037
Construction			265,476				265,476				-				-
Commercial real estate			1,235,221				1,215,980				1,022				18,219
Commercial			526,142				515,874				1,427				8,841
Consumer finance			29,109				28,728				353				28
Home equity and improvement			135,457				131,986				2,881				590
Total loans		$	2,466,267			$	2,427,668			$	7,884			$	30,715
September 30, 2017
One to four family residential real estate		$	271,048			$	265,873			$	1,807			$	3,368
Construction			244,920				244,920				-				-
Commercial real estate			1,205,695				1,187,826				759				17,110
Commercial			510,240				500,755				1,415				8,070
Consumer finance			29,009				28,741				209				59
Home equity and improvement			132,220				130,199				1,476				545
Total loans		$	2,393,132			$	2,358,314			$	5,666			$	29,152