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 $22.2 MILLION FOR 2013, UP 19% FROM FULL YEAR 2012

 

·

Net Income of $5.1 million for 2013 fourth quarter compared to $5.2 million in the fourth quarter of 2012

·

Fourth quarter 2013 includes $219,000 after tax loss on CDO securities

·

Loan growth $19.2 million during the quarter

·

Deposit growth $77.3 million during the quarter

·

Non-Performing loans down 15% from prior year

·

Net Interest Margin of 3.61% , down from 3.92% for the fourth quarter of 2012

 

DEFIANCE, OHIO (January 20, 2014) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today record net income for the fiscal year ended December 31, 2013 totaled $22.2 million, or $2.19 per diluted common share, compared to $18.7 million or $1.81 per diluted common share for the year ended December 31, 2012. For the fourth quarter 2013, First Defiance earned $5.1 million, or $0.50 per diluted common share compared to $5.2 million; or $0.52 per diluted common share for the fourth quarter of 2012.

 

“The record earnings achieved in 2013 reflects a very successful year for First Defiance,” said Donald P. Hileman, President and CEO of First Defiance Financial Corp. “Despite the challenges of an often uncertain economy, our financial performance was strengthened, and our core profitability was enhanced particularly by improved credit quality.”

 

The fourth quarter 2013 results were negatively impacted by a $219,000 after tax loss, or $0.02 per diluted common share, as a result of $337,000 in other-than-temporary impairment losses recognized on $1.9 million of collateralized debt obligations (CDOs). The CDO securities were among those considered disallowed under the revised final “Volcker Rule” of the Dodd-Frank Act which requires the Company to liquidate these securities.

 

In the fourth quarter of 2012, the Company executed a balance sheet restructuring strategy taking an after tax loss of approximately $260,000 through selling $60 million in securities for a gain of $1.6 million and paying off $62 million in FHLB advances with a prepayment penalty of $2.0 million.

 

 

Credit Quality

 

Non-performing loans totaled $27.8 million at December 31, 2013, a decrease from $32.6 million at December 31, 2012. In addition, First Defiance had $5.9 million of real estate owned at December 31, 2013 compared to $3.8 million at December 31, 2012. Accruing troubled debt restructured loans were $27.6 million at December 31, 2013 compared with $28.2 million at December 31, 2012. For the fourth quarter of 2013, First Defiance recorded net charge-offs of $1.5 million, down from $2.2 million in the fourth quarter of 2012 and up from $782,000 in the third quarter of 2013. The allowance for loan loss as a percentage of total loans was 1.58% at December 31, 2013 compared with 1.75% at December 31, 2012.

 

The fourth quarter results include expense for provision for loan losses of $475,000, compared with $2.6 million for the same period in 2012 and $476,000 in the third quarter of 2013.

 

“Non-performing assets declined during the quarter and are now at their lowest levels in over five years,” said Hileman. “Our improved credit quality resulted in lower provision expense and has been a key factor in our stronger earnings.”

 

Net Interest Income

 

Net interest income of $17.0 million in the fourth quarter of 2013 was down from $17.4 million in the fourth quarter of 2012. The net interest margin decreased to 3.61% in the fourth quarter of 2013 compared with 3.92% in the fourth quarter of 2012 and 3.84% in the third quarter of 2013. Yield on interest earning assets declined by 43 basis points, to 3.97% in the fourth quarter of 2013 from 4.40% in the fourth quarter of 2012. The cost of interest-bearing liabilities decreased by 14 basis points in the fourth quarter of 2013 to 0.46% from 0.60% in the fourth quarter of 2012.

 

“Our net interest income remained solid during the quarter, down just slightly from the previous quarter,” said Hileman. “Strong deposit growth during the quarter elevated our liquidity which led to some tightening in the net interest margin.”

 

Non-Interest Income

First Defiance’s non-interest income for the fourth quarter of 2013 was $6.5 million compared with $10.2 million in the fourth quarter of 2012. The fourth quarter of 2013 included $337,000 of securities losses realized on CDOs, while last year included $1.6 million in gains on the sale of investment securities from an executed balance sheet restructure strategy. In addition, mortgage banking income decreased to $1.3 million in the fourth quarter of 2013, down from $2.7 million in the fourth quarter of 2012. Gains from the sale of mortgage loans decreased in the fourth quarter of 2013 to $756,000 from $2.7 million in the fourth quarter of 2012. Mortgage loan servicing revenue was $918,000 in the fourth quarter of 2013, up from $888,000 in the fourth quarter of 2012. The Company had a negative change in the valuation adjustment in mortgage servicing assets (“MSR”) of only $4,000 in the fourth quarter of 2013 compared with a positive adjustment of $96,000 in the fourth quarter of 2012.

 

Service fees and other charges were $2.5 million in the fourth quarter of 2013, down from $2.6 million in the fourth quarter of 2012.

 

 

Income from the sale of insurance and investment products was $2.1 million in the fourth quarter of 2013, up from $2.0 million in the fourth quarter of 2012.

 

“Our fee income business units contributed significantly to our overall profitability this quarter while mortgage banking revenues remained well below the prior year’s level due to the reduction in refinance activity” stated Hileman.

 

Non-Interest Expenses

 

Total non-interest expense was $15.9 million in the fourth quarter of 2013, a decrease from $17.5 million in the fourth quarter of 2012. The fourth quarter last year included $2.0 million of prepayment fees associated with the repayment of FHLB debt resulting from the executed balance sheet restructuring strategy.

 

Compensation and benefits increased to $8.3 million in the fourth quarter of 2013 compared to $7.8 million in the fourth quarter of 2012. The increase in compensation and benefits is mainly related to higher incentive compensation and merit increases from a year ago. FDIC insurance costs decreased to $359,000 in the fourth quarter of 2013 from $660,000 in the fourth quarter of 2012 due to the improvement in the Company’s risk category late in the first quarter of 2013. Data processing cost increased to $1.3 million in the fourth quarter of 2013 from $1.2 million in the fourth quarter of 2012. Credit, collection and real estate owned costs were $835,000 in the fourth quarter of 2013, which included $452,000 of OREO write downs, compared to $488,000 in the same period of 2012. Other non-interest expense was $3.5 million in the fourth quarter of 2013, a decrease of $1.4 million from the fourth quarter of 2012 primarily due to the 2012 prepayment fee on repaying FHLB debt. The fourth quarter 2013 included secondary market buy-back losses of $51,000 compared to a reversal of $115,000 in accrued losses recorded in the fourth quarter 2012.

 

Annual Results

 

For the full year ended December 31, 2013, net income was $22.2 million, up 19% from $18.7 million in 2012. Net interest income for 2013 totaled $67.6 million, compared with $69.0 million for 2012. Average interest-earning assets decreased slightly to $1.85 billion in for 2013, compared to $1.86 billion in 2012. Net interest margin for 2013 was 3.76%, down 5 basis points from the 3.81% margin for 2012.

 

The provision for loan losses for 2013 was $1.8 million, compared to $10.9 million in 2012.

 

Non-interest income for the year 2013 was $30.6 million, compared to $34.4 million in 2012. Non-interest income for 2013 included $240,000 of net securities losses compared with $2.1 million of net securities gains for 2012. Service fees and other charges were $10.0 million for 2013, down from $10.8 million in 2012. Mortgage banking income decreased to $8.4 million for 2013, compared with $9.7 million in 2012. Insurance and investment sales revenues increased to $9.6 million for 2013, compared with $8.7 million for 2012 mainly due to an increase in contingent commissions of $436,000 in 2013.

 

 

Non-interest expense decreased to $64.8 million for 2013 from $65.8 million in 2012. Compensation and benefits expense was $34.3 million for 2013 compared with $32.6 million for 2012 primarily due to merit increases from a year ago, higher incentive expenses and an increase in medical insurance costs. Credit, collection and real estate owned costs have increased $391,000 from 2012 and secondary market buy-back losses have increased $524,000 for 2013 compared to 2012.

 

Total Assets at $2.14 Billion

 

Total assets at December 31, 2013 were $2.14 billion, compared to $2.05 billion at December 31, 2012. Net loans receivable (excluding loans held for sale) were $1.56 billion at December 31, 2013, compared to $1.49 billion at December 31, 2012. Total cash and cash equivalents were $179.3 million at December 31, 2013 compared with $136.8 million at December 31, 2012. Also, at December 31, 2013, goodwill and other intangible assets totaled $65.0 million compared to $66.3 million at December 31, 2012.

 

Total deposits at December 31, 2013 were $1.74 billion compared with $1.67 billion at December 31, 2012. Non-interest bearing deposits at December 31, 2013 were $348.9 million compared to $315.1 million at December 31, 2012. Total stockholders’ equity was $272.1 million at December 31, 2013 compared to $258.1 million at December 31, 2012.

 

Dividend to be Paid February 28

The Board of Directors declared a quarterly cash dividend of $0.15 per common share payable February 28, 2014 to shareholders of record at the close of business on February 21, 2014. The dividend represents an annual dividend of 2.37% percent based on the First Defiance common stock closing price on January 17, 2014. First Defiance has approximately 9,719,521 common shares outstanding.

 

Conference Call

 

First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, January 21, 2014 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-888-317-6016. A live webcast may be accessed at http://services.choruscall.com/links/fdef140121.html.

Audio replay of the Internet Webcast will be available at www.fdef.com until January 21, 2015 at 9:00 a.m.

 

First Defiance Financial Corp.

 

First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal operates 32 full service branches and 42 ATM locations in northwest Ohio, southeast Michigan and northeast Indiana. First Insurance Group is a full-service insurance agency with five offices throughout northwest Ohio.

 

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

 

Financial Statements and Highlights Follow-

 

 

Safe Harbor Statement

This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission (SEC) filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2012. One or more of these factors have affected or could in the future affect the Company's business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.

 

 

Consolidated Balance Sheets (Unaudited)

First Defiance Financial Corp.

 

		December 31,				December 31,
(in thousands)		2013				2012
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	36,318			$	45,832
Interest-bearing deposits			143,000				91,000
			179,318				136,832
Securities
Available-for sale, carried at fair value			198,170				194,101
Held-to-maturity, carried at amortized cost			387				508
			198,557				194,609
Loans			1,580,448				1,525,257
Allowance for loan losses			(24,950	)			(26,711	)
Loans, net			1,555,498				1,498,546
Loans held for sale			9,120				22,064
Mortgage servicing rights			9,106				7,833
Accrued interest receivable			5,778				5,594
Federal Home Loan Bank stock			19,350				20,655
Bank Owned Life Insurance			42,715				41,832
Office properties and equipment			38,597				39,663
Real estate and other assets held for sale			5,859				3,805
Goodwill			61,525				61,525
Core deposit and other intangibles			3,497				4,738
Deferred taxes			565				78
Other assets			7,663				9,174
Total Assets		$	2,137,148			$	2,046,948
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	348,943			$	315,132
Interest-bearing deposits			1,386,849				1,352,340
Total deposits			1,735,792				1,667,472
Advances from Federal Home Loan Bank			22,520				12,796
Notes payable and other interest-bearing liabilities			51,919				51,702
Subordinated debentures			36,083				36,083
Advance payments by borrowers for tax and insurance			1,519				1,473
Other liabilities			17,168				19,294
Total liabilities			1,865,001				1,788,820
Stockholders’ Equity
Preferred stock			-				-
Common stock, net			127				127
Common stock warrant			878				878
Additional paid-in-capital			136,403				136,046
Accumulated other comprehensive income			545				4,274
Retained earnings			182,290				164,103
Treasury stock, at cost			(48,096	)			(47,300	)
Total stockholders’ equity			272,147				258,128
Total Liabilities and Stockholders’ Equity		$	2,137,148			$	2,046,948

 

 

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)		2013				2012				2013				2012
Interest Income:
Loans		$	17,037			$	17,774			$	68,077			$	72,621
Investment securities			1,397				1,504				5,596				7,123
Interest-bearing deposits			108				51				282				300
FHLB stock dividends			195				243				826				899
Total interest income			18,737				19,572				74,781				80,943
Interest Expense:
Deposits			1,399				1,775				5,913				8,169
FHLB advances and other			136				164				434				2,424
Subordinated debentures			149				158				601				971
Notes Payable			44				89				222				373
Total interest expense			1,728				2,186				7,170				11,937
Net interest income			17,009				17,386				67,611				69,006
Provision for loan losses			475				2,618				1,824				10,924
Net interest income after provision for loan losses			16,534				14,768				65,787				58,082
Non-interest Income:
Service fees and other charges			2,506				2,631				10,045				10,779
Mortgage banking income			1,324				2,741				8,443				9,665
Gain on sale of non-mortgage loans			49				20				101				70
Gain on sale of securities			-				1,611				97				2,139
Impairment on securities			(337	)			(5	)			(337	)			(5	)
Insurance and investment sales commissions			2,089				1,997				9,627				8,676
Trust income			216				146				761				616
Income from Bank Owned Life Insurance			211				241				883				924
Other non-interest income			415				798				950				1,510
Total Non-interest Income			6,473				10,180				30,570				34,374
Non-interest Expense:
Compensation and benefits			8,310				7,806				34,301				32,566
Occupancy			1,675				1,860				6,762				7,578
FDIC insurance premium			359				660				1,616				2,691
State franchise tax			486				846				2,323				2,495
Data processing			1,313				1,183				5,125				4,660
Amortization of intangibles			296				344				1,241				1,413
Other non-interest expense			3,490				4,839				13,476				14,377
Total Non-interest Expense			15,929				17,538				64,844				65,780
Income before income taxes			7,078				7,410				31,513				26,676
Income taxes			1,991				2,253				9,278				8,012
Net Income		$	5,087			$	5,157			$	22,235			$	18,664
Dividends Accrued on Preferred Shares			-				-				-				(900	)
Accretion on Preferred Shares			-				-				-				(359	)
Redemption of Preferred Shares			-				-				-				642
Net Income Applicable to Common Shares		$	5,087			$	5,157			$	22,235			$	18,047
Earnings per common share:
Basic		$	0.52			$	0.53			$	2.28			$	1.86
Diluted		$	0.50			$	0.52			$	2.19			$	1.81
Average Shares Outstanding:
Basic			9,766				9,729				9,764				9,728
Diluted			10,198				10,012				10,171				9,998

 

 

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)		2013				2012				% change				2013				2012				% change
Summary of Operations
Tax-equivalent interest income (1)		$	19,143			$	19,993				(4.3	)%		$	76,413			$	82,598				(7.5	)%
Interest expense			1,728				2,186				(21.0	)			7,170				11,937				(39.9	)
Tax-equivalent net interest income (1)			17,415				17,807				(2.2	)			69,243				70,661				(2.0	)
Provision for loan losses			475				2,618				(81.9	)			1,824				10,924				(83.3	)
Tax-equivalent NII after provision for loan loss (1)			16,940				15,189				11.5				67,419				59,737				12.9
Investment Securities gains			-				1,611				(100.0	)			97				2,139				(95.5	)
Impairment losses on securities			(337	)			(5	)			NM				(337	)			(5	)			NM
Non-interest income (excluding securities gains/losses)			6,810				8,574				(20.6	)			30,810				32,240				(4.4	)
Non-interest expense			15,929				17,538				(9.2	)			64,844				65,780				(1.4	)
Income taxes			1,991				2,253				(11.6	)			9,278				8,012				15.8
Net Income			5,087				5,157				(1.4	)			22,235				18,664				19.1
Dividends Declared on Preferred Shares			-				-				NM				-				(900	)			NM
Accretion on Preferred Shares			-				-				NM				-				(359	)			NM
Redemption on Preferred Shares			-				-				NM				-				642				NM
Net Income Applicable to Common Shares			5,087				5,157				(1.4	)			22,235				18,047				23.2
Tax equivalent adjustment (1)			406				421				(3.6	)			1,632				1,655				(1.4	)
At Period End
Assets			2,137,148				2,046,948				4.4
Earning assets			1,950,475				1,853,585				5.2
Loans			1,580,448				1,525,257				3.6
Allowance for loan losses			24,950				26,711				(6.6	)
Deposits			1,735,792				1,667,472				4.1
Stockholders’ equity			272,147				258,128				5.4
Average Balances
Assets			2,124,109				2,023,890				5.0				2,052,250				2,063,552				(0.5	)
Earning assets			1,915,508				1,815,263				5.5				1,845,462				1,862,340				(0.9	)
Loans			1,543,057				1,509,611				2.2				1,528,176				1,477,681				3.4
Deposits and interest-bearing liabilities			1,833,291				1,744,274				5.1				1,766,579				1,775,082				(0.5	)
Deposits			1,719,319				1,633,432				5.3				1,661,895				1,619,637				2.6
Stockholders’ equity			270,856				256,304				5.7				265,065				267,194				(0.8	)
Stockholders’ equity / assets			12.75	%			12.66	%			0.7				12.92	%			12.95	%			(0.3	)
Per Common Share Data
Net Income
Basic		$	0.52			$	0.53				(1.9	)		$	2.28			$	1.86				22.6
Diluted			0.50				0.52				(3.8	)			2.19				1.81				21.0
Dividends			0.10				0.05				100.0				0.40				0.20				100.0
Market Value:
High		$	27.25			$	19.38				40.6			$	28.46			$	19.38				46.9
Low			23.31				15.75				48.0				18.42				14.41				27.8
Close			25.97				19.19				35.3				23.39				19.19				21.9
Common Book Value			27.91				26.44				5.5				27.91				26.44				5.5
Tangible Common Book Value			21.22				19.63				8.1				21.22				19.63				8.1
Shares outstanding, end of period (000)			9,720				9,729				(0.1	)			9,720				9,729				(0.1	)
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.61	%			3.92	%			(7.9	)			3.76	%			3.81	%			(1.4	)
Return on average assets			0.95	%			1.01	%			(6.3	)			1.08	%			0.90	%			19.8
Return on average equity			7.45	%			8.00	%			(6.9	)			8.39	%			6.99	%			20.1
Efficiency ratio (2)			65.75	%			66.48	%			(1.1	)			64.81	%			63.93	%			1.4
Effective tax rate			28.13	%			30.40	%			(7.5	)			29.44	%			30.03	%			(2.0	)
Dividend payout ratio (basic)			19.23	%			9.43	%			103.8				17.54	%			10.75	%			63.2

 

(1)

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

(2)

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

NM Percentage change not meaningful

 

 

Income from Mortgage Banking

 

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

 

		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
(dollars in thousands)		2013				2012				2013				2012
Gain from sale of mortgage loans		$	756			$	2,709			$	5,716			$	10,599
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			918				888				3,564				3,387
Amortization of mortgage servicing rights			(346	)			(952	)			(2,098	)			(3,562	)
Mortgage servicing rights valuation adjustments			(4	)			96				1,261				(759	)
			568				32				2,727				(934	)
Total revenue from sale and servicing of mortgage loans		$	1,324			$	2,741			$	8,443			$	9,665

 

 

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended December 31,
		(dollars in thousands)
		2013												2012
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	1,543,057			$	17,055				4.39	%		$	1,509,611			$	17,799				4.69	%
Securities			187,230				1,785				3.82	%			204,882				1,900				3.86	%
Interest Bearing Deposits			165,871				108				0.26	%			80,115				51				0.25	%
FHLB stock			19,350				195				4.00	%			20,655				243				4.68	%
Total interest-earning assets			1,915,508				19,143				3.97	%			1,815,263				19,993				4.40	%
Non-interest-earning assets			208,601												208,627
Total assets		$	2,124,109											$	2,023,890
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,382,526			$	1,399				0.40	%		$	1,338,400			$	1,775				0.53	%
FHLB advances and other			22,604				136				2.39	%			19,015				164				3.43	%
Subordinated debentures			36,129				149				1.64	%			55,688				89				0.64	%
Notes payable			55,239				44				0.32	%			36,139				158				1.74	%
Total interest-bearing liabilities			1,496,498				1,728				0.46	%			1,449,242				2,186				0.60	%
Non-interest bearing deposits			336,793				-				-				295,032				-				-
Total including non-interest-bearing demand deposits			1,833,291				1,728				0.37	%			1,744,274				2,186				0.50	%
Other non-interest-bearing liabilities			19,962												23,312
Total liabilities			1,853,253												1,767,586
Stockholders' equity			270,856												256,304
Total liabilities and stockholders' equity		$	2,124,109											$	2,023,890
Net interest income; interest rate spread						$	17,415				3.51	%						$	17,807				3.80	%
Net interest margin (3)											3.61	%											3.92	%
Average interest-earning assets  to average interest bearing liabilities											128	%											125	%

 

		Twelve Months Ended December 31,
		2013												2012
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	1,528,176			$	68,147				4.46	%		$	1,477,681			$	72,724				4.92	%
Securities			191,039				7,158				3.78	%			247,442				8,675				3.63	%
Interest Bearing Deposits			106,742				282				0.26	%			116,562				300				0.26	%
FHLB stock			19,505				826				4.23	%			20,655				899				4.35	%
Total interest-earning assets			1,845,462				76,413				4.14	%			1,862,340				82,598				4.44	%
Non-interest-earning assets			206,788												201,212
Total assets		$	2,052,250											$	2,063,552
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,353,304			$	5,913				0.44	%		$	1,352,724			$	8,169				0.60	%
FHLB advances and other			17,709				434				2.45	%			66,121				2,424				3.67	%
Subordinated debentures			36,133				601				1.66	%			53,155				373				0.70	%
Notes payable			50,842				222				0.44	%			36,169				971				2.68	%
Total interest-bearing liabilities			1,457,988				7,170				0.49	%			1,508,169				11,937				0.79	%
Non-interest bearing deposits			308,591				-				-				266,913				-				-
Total including non-interest-bearing demand deposits			1,766,579				7,170				0.41	%			1,775,082				11,937				0.67	%
Other non-interest-bearing liabilities			20,606												21,276
Total liabilities			1,787,185												1,796,358
Stockholders' equity			265,065												267,194
Total liabilities and stockholders' equity		$	2,052,250											$	2,063,552
Net interest income; interest rate spread						$	69,243				3.65	%						$	70,661				3.64	%
Net interest margin (3)											3.76	%											3.81	%
Average interest-earning assets  to average interest bearing liabilities											127	%											123	%

 

(1)

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

(2)

Annualized

(3)

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

 

 

Selected Quarterly Information

First Defiance Financial Corp.

 

(dollars in thousands, except per share data)		4th Qtr 2013				3rd Qtr 2013				2nd Qtr 2013				1st Qtr 2013				4th Qtr 2012
Summary of Operations
Tax-equivalent interest income (1)		$	19,143			$	19,242			$	19,143			$	18,885			$	19,993
Interest expense			1,728				1,680				1,814				1,949				2,186
Tax-equivalent net interest income (1)			17,415				17,562				17,329				16,936				17,807
Provision for loan losses			475				476				448				425				2,618
Tax-equivalent NII after provision for loan losses (1)			16,940				17,086				16,881				16,511				15,189
Investment securities gains, net of impairment			(337	)			-				44				53				1,606
Non-interest income (excluding securities gains/losses)			6,810				7,289				7,804				8,909				8,574
Non-interest expense			15,929				16,045				15,674				17,199				17,538
Income taxes			1,991				2,445				2,535				2,306				2,253
Net income			5,087				5,479				6,109				5,559				5,157
Dividends Declared on Preferred Shares			-				-				-				-				-
Accretion on Preferred Shares			-				-				-				-				-
Redemption on Preferred Shares			-				-				-				-				-
Net Income Applicable to Common Shares			5,087				5,479				6,109				5,559				5,157
Tax equivalent adjustment (1)			406				406				411				409				421
At Period End
Total assets		$	2,137,148			$	2,058,430			$	2,066,216			$	2,039,411			$	2,046,948
Earning assets			1,950,475				1,863,546				1,873,351				1,858,747				1,853,585
Loans			1,580,448				1,561,279				1,562,666				1,507,008				1,525,257
Allowance for loan losses			24,950				25,964				26,270				26,459				26,711
Deposits			1,735,792				1,658,492				1,635,708				1,656,348				1,667,472
Stockholders’ equity			272,147				269,359				264,497				262,643				258,128
Stockholders’ equity / assets			12.73	%			13.09	%			12.80	%			12.88	%			12.61	%
Goodwill			61,525				61,525				61,525				61,525				61,525
Average Balances
Total assets		$	2,124,109			$	2,026,277			$	2,030,707			$	2,027,906			$	2,023,890
Earning assets			1,915,508				1,816,626				1,825,730				1,823,089				1,815,263
Loans			1,543,057				1,548,718				1,520,708				1,500,222				1,509,611
Deposits and interest-bearing liabilities			1,833,291				1,741,850				1,745,084				1,746,092				1,744,274
Deposits			1,719,319				1,632,712				1,644,777				1,650,772				1,633,432
Stockholders’ equity			270,856				265,488				264,293				259,625				256,304
Stockholders’ equity / assets			12.75	%			13.10	%			13.01	%			12.80	%			12.66	%
Per Common Share Data
Net Income:
Basic		$	0.52			$	0.56			$	0.63			$	0.57			$	0.53
Diluted			0.50				0.54				0.60				0.55				0.52
Dividends			0.10				0.10				0.10				0.10				0.05
Market Value:
High		$	27.25			$	28.46			$	23.75			$	23.75			$	19.38
Low			23.31				22.49				20.80				18.42				15.75
Close			25.97				23.39				22.55				23.32				19.19
Common Book Value			27.91				27.44				26.97				26.80				26.44
Shares outstanding, end of period (in thousands)			9,720				9,785				9,776				9,766				9,729
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.61	%			3.84	%			3.82	%			3.78	%			3.92	%
Return on average assets			0.95	%			1.07	%			1.21	%			1.11	%			1.01	%
Return on average equity			7.45	%			8.19	%			9.27	%			8.68	%			8.00	%
Efficiency ratio (2)			65.75	%			64.56	%			62.36	%			66.55	%			66.48	%
Effective tax rate			28.13	%			30.86	%			29.33	%			29.32	%			30.40	%
Common dividend payout ratio (basic)			19.23	%			17.86	%			15.87	%			17.54	%			9.43	%

 

(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 2013				3rd Qtr 2013				2nd Qtr 2013				1st Qtr 2013				4th Qtr 2012
Loan Portfolio Composition
One to four family residential real estate		$	195,752			$	191,984			$	196,802			$	197,675			$	200,826
Construction			86,058				59,567				41,519				33,398				37,788
Commercial real estate			819,618				821,115				820,412				802,098				797,385
Commercial			388,236				386,160				396,158				365,551				383,817
Consumer finance			16,902				16,659				16,817				15,549				15,936
Home equity and improvement			106,930				105,727				106,570				106,524				108,718
Total loans			1,613,496				1,581,212				1,578,278				1,520,795				1,544,470
Less:
Loans in process			32,290				19,189				14,876				13,084				18,478
Deferred loan origination fees			758				744				736				703				735
Allowance for loan loss			24,950				25,964				26,270				26,459				26,711
Net Loans		$	1,555,498			$	1,535,315			$	1,536,396			$	1,480,549			$	1,498,546
Allowance for loan loss activity
Beginning allowance		$	25,964			$	26,270			$	26,459			$	26,711			$	26,310
Provision for loan losses			475				476				448				425				2,618
Credit loss charge-offs:
One to four family residential real estate			175				78				184				206				976
Commercial real estate			1,097				829				283				266				593
Commercial			670				39				316				205				541
Consumer finance			7				33				8				46				59
Home equity and improvement			144				170				170				272				497
Total charge-offs			2,093				1,149				961				995				2,666
Total recoveries			604				367				324				318				449
Net charge-offs (recoveries)			1,489				782				637				677				2,217
Ending allowance		$	24,950			$	25,964			$	26,270			$	26,459			$	26,711
Credit Quality
Total non-performing loans (1)		$	27,847			$	30,512			$	28,650			$	35,283			$	32,570
Real estate owned (REO)			5,859				5,518				6,546				4,313				3,805
Total non-performing assets (2)		$	33,706			$	36,030			$	35,196			$	39,596			$	36,375
Net charge-offs			1,489				782				637				677				2,217
Restructured loans, accruing (3)			27,630				28,010				28,732				27,981				28,203
Allowance for loan losses / loans			1.58	%			1.66	%			1.68	%			1.76	%			1.75	%
Allowance for loan losses / non-performing assets			74.02	%			72.06	%			74.64	%			66.82	%			73.43	%
Allowance for loan losses / non-performing loans			89.60	%			85.09	%			91.69	%			74.99	%			82.01	%
Non-performing assets / loans plus REO			2.12	%			2.30	%			2.24	%			2.62	%			2.38	%
Non-performing assets / total assets			1.58	%			1.75	%			1.70	%			1.94	%			1.78	%
Net charge-offs / average loans (annualized)			0.39	%			0.20	%			0.17	%			0.18	%			0.59	%
Deposit Balances
Non-interest-bearing demand deposits		$	348,943			$	300,891			$	301,742			$	291,765			$	315,132
Interest-bearing demand deposits and money market			715,939				681,987				659,249				681,061				664,857
Savings deposits			185,121				182,271				182,784				177,336				166,945
Retail time deposits less than $100,000			313,335				318,317				321,422				330,870				342,472
Retail time deposits greater than $100,000			172,454				175,026				168,573				173,379				176,029
National/Brokered time deposits			-				-				1,938				1,937				2,037
Total deposits		$	1,735,792			$	1,658,492			$	1,635,708			$	1,656,348			$	1,667,472

 

(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, 2013
One to four family residential real estate		$	195,752			$	190,854			$	1,625			$	3,273
Construction			86,058				86,058				-				-
Commercial real estate			819,618				803,218				566				15,834
Commercial			388,236				379,889				20				8,327
Consumer finance			16,902				16,771				131				-
Home equity and improvement			106,930				105,211				1,306				413
Total loans		$	1,613,496			$	1,582,001			$	3,648			$	27,847
September 30, 2013
One to four family residential real estate		$	191,984			$	188,065			$	760			$	3,159
Construction			59,567				59,567				-				-
Commercial real estate			821,115				802,115				574				18,426
Commercial			386,160				377,116				295				8,749
Consumer finance			16,659				16,616				43				-
Home equity and improvement			105,727				103,997				1,552				178
Total loans		$	1,581,212			$	1,547,476			$	3,224			$	30,512
December 31, 2012
One to four family residential real estate		$	200,826			$	195,188			$	2,036			$	3,602
Construction			37,788				37,788				-				-
Commercial real estate			797,385				773,170				1,125				23,090
Commercial			383,817				376,548				1,608				5,661
Consumer finance			15,936				15,701				235				-
Home equity and improvement			108,718				106,002				2,499				217
Total loans		$	1,544,470			$	1,504,397			$	7,503			$	32,570