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 2015

THIRD QUARTER EARNINGS

 

·

Earnings per share of $0.72 for 2015 third quarter up from $0.71 in 2014 third quarter

·

Net income of $6.7 million for 2015 third quarter compared to $7.1 million in the 2014 third quarter

·

Net interest margin of 3.78%, up from 3.73% in the 2014 third quarter

·

Loans up $97.3 million, or 5.9% from 2014 third quarter

·

Deposits up $62.4 million, or 3.6% from 2014 third quarter

·

Nonperforming loans down $5.9 million, or 26.3% from 2014 third quarter

 

DEFIANCE, OHIO (October 19, 2015) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the third quarter ended September 30, 2015 totaled $6.7 million, or $0.72 per diluted common share, compared to $7.1 million or $0.71 per diluted common share for the quarter ended September 30, 2014.

 

Last year’s third quarter results were positively impacted by $299,000 after tax gains on the sale of securities, a $903,000 tax-free benefit from a bank-owned life insurance policy and a $498,000 tax-free gain realized through the company’s deferred compensation plan trust. Additional net adjustments to income taxes of $250,000, which included the write-off of a portion of unused deferred tax assets, negatively impacted third quarter 2014 results. These items combined to increase the third quarter 2014 net income by $1.45 million, or $0.15 per diluted common share.

 

“We are very pleased with our financial results for the third quarter and for year-to-date 2015,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “Our earnings per diluted share are up 17.9% year-to-date; and we have had steady loan growth, a strong net interest margin and increased fee income within all business lines. Solid core revenue growth coupled with disciplined expense control, improved asset quality and effective capital management have generated significant improvement in our performance.”

 

Net interest income up compared to third quarter 2014

 

Net interest income of $18.5 million in the third quarter of 2015 was up from $17.7 in the third quarter of 2014. Net interest margin was 3.78% for the third quarter of 2015, down from 3.81% in the second quarter 2015, but up from 3.73% in the third quarter of 2014. Yield on interest earning assets increased by 7 basis points, to 4.13% in the third quarter of 2015 from 4.06% in the third quarter of 2014. The cost of interest-bearing liabilities increased by 2 basis points in the third quarter of 2015 to 0.45% from 0.43% in the third quarter of 2014.

 

 

“Our net interest margin remains strong despite a challenging rate environment and competitive business climate,” said Hileman. “Steady loan demand across our market areas has enabled us to grow our balance sheet and maintain a profitable earning asset mix. Our net interest income is up $870,000, or 5% over the third quarter last year.”

 

Non-interest income down from third quarter 2014

 

First Defiance’s non-interest income for the third quarter of 2015 was $8.0 million compared with $9.4 million in the third quarter of 2014. The third quarter 2015 had no gains or losses on the sale of securities, while the third quarter 2014 included gains of $460,000, as well as a $903,000 tax-free benefit from a bank-owned life insurance policy and a $498,000 tax-free gain realized through the company’s deferred compensation plan trust.

 

Mortgage banking income increased to $1.7 million in the third quarter of 2015, up from $1.5 million in the third quarter of 2014. Mortgage banking activity in the third quarter was stronger than a year ago, with our markets experiencing increased purchase and refinance loan volumes. Gains from the sale of mortgage loans increased in the third quarter of 2015 to $1.2 million from $1.0 million in the third quarter of 2014. Mortgage loan servicing revenue was $866,000 in the third quarter of 2015, down slightly from $870,000 in the third quarter of 2014. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $24,000 in the third quarter of 2015 compared with a positive adjustment of $68,000 in the third quarter of 2014. In addition, gains on the sale of non-mortgages which include SBA and FSA loans, totaled $543,000 in the third quarter 2015 compared to $197,000 in the second quarter 2015 and $40,000 in the third quarter 2014.

 

For the third quarter 2015, service fees and other charges were $2.8 million, up from $2.7 million in the third quarter of 2014 and commissions from the sale of insurance products were $2.3 million, down from $2.4 million in the third quarter 2014. Trust income was $370,000 in the third quarter of 2015, up 17.5% from $315,000 in the third quarter of 2014.

 

“Our mortgage banking business continued to perform very well in the third quarter as originations remain elevated versus a year ago. Year-to-date mortgage revenues are up 21% over the prior year,” said Hileman. “In fact, revenue growth in service fees, insurance commissions and trust income all contributed to our improved performance this year.”

 

Non-interest expenses up from third quarter 2014

 

Total non-interest expense was $16.8 million in the third quarter of 2015, up only $77,000 from the third quarter of 2014. Compensation and benefits increased to $9.8 million in the third quarter of 2015 compared to $9.3 million in the third quarter of 2014. The increase in compensation and benefits from a year ago is mainly related to merit increases and higher incentive compensation. Occupancy expense was $1.8 million in the third quarter 2015, up from $1.6 million in the third quarter 2014. Data processing cost was $1.5 million in the third quarter of 2015 essentially even with the third quarter of 2014. Other non-interest expense of $2.8 million in the third quarter of 2015, decreased from $3.2 million in the third quarter of 2014 primarily due to reduced costs for advertising and management consulting.

 

 

Credit quality

 

Non-performing loans totaled $16.6 million at September 30, 2015, a decrease from $22.5 million at September 30, 2014. In addition, First Defiance had $4.9 million of real estate owned at September 30, 2015 compared to $5.3 million at September 30, 2014. Accruing troubled debt restructured loans were $13.8 million at September 30, 2015 compared with $26.6 million at September 30, 2014. For the third quarter of 2015, First Defiance recorded net charge-offs of $148,000, compared to net charge-offs of $466,000 in the third quarter of 2014. The allowance for loan loss as a percentage of total loans was 1.45% at September 30, 2015 compared with 1.50% at September 30, 2014.

 

The third quarter results include a credit provision for loan losses of $27,000 compared with an expense of $406,000 for the same period in 2014.

 

“Total non-performing assets, including troubled debt restructurings, declined $19 million during the third quarter 2015 and are down 35% from a year ago,” said Hileman. “We have experienced net recoveries on loans of $350,000 year-to-date, and our allowance for loan losses coverage of our non-performing loans remains strong at over 150%. We are quite pleased with our asset quality improvement this year.”

 

Year-to-date results

 

For the nine-month period ended on September 30, 2015, net income totaled $19.9 million, or $2.11 per diluted common share, compared to $17.9 million or $1.79 per diluted common share for the nine months ended on September 30, 2014.

 

Net interest income was $55.1 million for the first nine months of 2015 compared with $51.6 million in the same period of 2014. Average interest-earning assets increased to $1.984 billion in the first nine months of 2015, compared to $1.941 billion in the same period of 2014. Net interest margin for the first nine months of 2015 was 3.82%, up 17 basis points from the 3.65% margin reported in the same period of 2014.

 

The provision for loan losses in the first nine months of 2015 was $93,000, compared to $955,000 recorded during the same period of 2014.

 

Non-interest income for the first nine months of 2015 was $24.1 million, compared to $24.3 million during the same period of 2014. Service fees and other charges were $8.0 million for the first nine months of 2015, up from $7.5 million during the same period of 2014. Mortgage banking income increased to $5.2 million for the first nine months of 2015, compared with $4.3 million during the same period of 2014. Gains on the sale of non-mortgage loans were $776,000 for the first nine months of 2015, compared with $79,000 during the same period of 2014. Insurance commissions rose to $7.8 million for the first nine months of 2015, compared with $7.6 million for same period of 2014. Non-interest income for the first nine months of 2015 included no gains or losses on the sale of securities compared with gains of $931,000 during the same period of 2014. In addition, the first nine months of 2014 also included a $903,000 tax free benefit from a bank owned life insurance policy and a $498,000 tax free gain realized through the company’s deferred compensation plan trust.

 

Non-interest expense was $50.5 million for the first nine months of 2015, up from $49.8 million for the same period of 2014. Compensation and benefits expense was $27.9 million for the first nine months of 2015 compared with $26.5 million during the same period of 2014. The increase in compensation and benefits over the prior year is mainly related to merit increases and higher incentive compensation accruals partially offset by lower medical insurance costs. Increases in occupancy of $456,000 and data processing of $319,000 were offset by decreases in FDIC insurance premiums of $89,000, financial institutions taxes of $184,000, amortization of intangibles of $296,000 and other expenses of $881,000, which included a $786,000 cost recorded in the first quarter 2014 for terminating a merger agreement.

 

Total assets at $2.2 billion

 

Total assets at September 30, 2015 were $2.23 billion compared to $2.18 billion at December 31, 2014 and $2.15 billion at September 30, 2014. Net loans receivable (excluding loans held for sale) were $1.71 billion at September 30, 2015 compared to $1.62 billion at December 31, 2014 and $1.61 billion at September 30, 2014. Total cash and cash equivalents were $73.3 million at September 30, 2015 compared with $112.9 million at December 31, 2014 and $96.7 million at September 30, 2014. Also, at September 30, 2015, goodwill and other intangible assets totaled $63.8 million compared to $63.9 million at December 31, 2014 and $64.2 million at September 30, 2014.

 

Total deposits at September 30, 2015 were $1.79 billion compared with $1.76 billion at December 31, 2014, and $1.73 billion at September 30, 2014. Non-interest bearing deposits at September 30, 2015 were $392.1 million compared to $379.6 million at December 31, 2014 and $340.6 million at September 30, 2014. Total stockholders’ equity was $278.6 million at September 30, 2015 compared to $279.5 million at December 31, 2014 and $278.2 million at September 30, 2014.

 

The reduction in stockholders’ equity from year-end 2014 includes the $12 million cost of the March 11, 2015 repurchase of the warrant issued to the U.S. Treasury under the TARP Capital Purchase Program.

 

Dividend to be paid November 20

 

The Board of Directors declared a quarterly cash dividend of $0.20 per common share payable November 20, 2015 to shareholders of record at the close of business on November 13, 2015. The dividend represents an annual dividend of 2.10 percent based on the First Defiance common stock closing price on October 16, 2015. First Defiance has approximately 9,172,000 common shares outstanding.

 

Conference call

 

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, October 20, 2015 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/fdef151020.html.

 

 

Audio replay of the Internet Webcast will be available at www.fdef.com until November 20, 2015 at 9:00 a.m. ET

 

First Defiance Financial Corp.

 

First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal operates 33 full-service branches and 41 ATM locations in northwest Ohio, southeast Michigan and northeast Indiana and a loan production office in Columbus, Ohio. First Insurance Group is a full-service insurance agency with six offices throughout northwest Ohio.

 

For more information, visit the company’s 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, 2014. 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, 2015 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)		2015				2014
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	34,308			$	41,936
Interest-bearing deposits			39,000				71,000
			73,308				112,936
Securities
Available-for sale, carried at fair value			236,926				239,321
Held-to-maturity, carried at amortized cost			251				313
			237,177				239,634
Loans			1,733,538				1,646,786
Allowance for loan losses			(25,209	)			(24,766	)
Loans, net			1,708,329				1,622,020
Loans held for sale			6,701				4,535
Mortgage servicing rights			9,194				9,012
Accrued interest receivable			7,142				6,037
Federal Home Loan Bank stock			13,802				13,802
Bank Owned Life Insurance			51,671				47,013
Office properties and equipment			38,993				40,496
Real estate and other assets held for sale			4,936				6,181
Goodwill			61,798				61,525
Core deposit and other intangibles			2,034				2,395
Other assets			13,196				13,366
Total Assets		$	2,228,281			$	2,178,952
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	392,103			$	379,552
Interest-bearing deposits			1,400,950				1,381,261
Total deposits			1,793,053				1,760,813
Advances from Federal Home Loan Bank			40,801				21,544
Notes payable and other interest-bearing liabilities			53,838				54,759
Subordinated debentures			36,083				36,083
Advance payments by borrowers for tax and insurance			1,864				2,309
Deferred Taxes			978				1,176
Other liabilities			23,108				22,763
Total Liabilities			1,949,725				1,899,447
Stockholders’ Equity
Preferred stock			-				-
Common stock, net			127				127
Common stock warrant			-				878
Additional paid-in-capital			125,615				136,266
Accumulated other comprehensive income			3,909				4,114
Retained earnings			215,007				200,600
Treasury stock, at cost			(66,102	)			(62,480	)
Total stockholders’ equity			278,556				279,505
Total Liabilities and Stockholders’ Equity		$	2,228,281			$	2,178,952

 

  

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)		2015				2014				2015				2014
Interest Income:
Loans		$	18,419			$	17,365			$	54,445			$	50,894
Investment securities			1,676				1,720				5,089				4,855
Interest-bearing deposits			33				64				113				283
FHLB stock dividends			138				137				413				502
Total interest income			20,266				19,286				60,060				56,534
Interest Expense:
Deposits			1,363				1,304				3,947				3,989
FHLB advances and other			178				131				461				397
Subordinated debentures			154				147				451				439
Notes Payable			38				41				113				121
Total interest expense			1,733				1,623				4,972				4,946
Net interest income			18,533				17,663				55,088				51,588
Provision for loan losses			(27	)			406				93				955
Net interest income after provision for loan losses			18,560				17,257				54,995				50,633
Non-interest Income:
Service fees and other charges			2,799				2,660				8,018				7,492
Mortgage banking income			1,680				1,545				5,248				4,332
Gain on sale of non-mortgage loans			543				40				776				79
Gain on sale of securities			-				460				-				931
Insurance commissions			2,310				2,366				7,793				7,640
Trust income			370				315				1,095				895
Income from Bank Owned Life Insurance			238				1,130				658				1,584
Other non-interest income			42				840				485				1,346
Total Non-interest Income			7,982				9,356				24,073				24,299
Non-interest Expense:
Compensation and benefits			9,791				9,287				27,896				26,468
Occupancy			1,788				1,613				5,361				4,905
FDIC insurance premium			329				350				999				1,088
Financial institutions tax			447				515				1,340				1,524
Data processing			1,531				1,489				4,652				4,333
Amortization of intangibles			157				269				536				832
Other non-interest expense			2,805				3,248				9,758				10,639
Total Non-interest Expense			16,848				16,771				50,542				49,789
Income before income taxes			9,694				9,842				28,526				25,143
Income taxes			2,998				2,773				8,666				7,206
Net Income		$	6,696			$	7,069			$	19,860			$	17,937
Earnings per common share:
Basic		$	0.72			$	0.75			$	2.15			$	1.87
Diluted		$	0.72			$	0.71			$	2.11			$	1.79
Average Shares Outstanding:
Basic			9,238				9,445				9,247				9,577
Diluted			9,322				9,903				9,430				10,031

 

  

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)		2015				2014				% change				2015				2014				% change
Summary of Operations
Tax-equivalent interest income (1)		$	20,748			$	19,751				5.0	%		$	61,485			$	57,871				6.2	%
Interest expense			1,733				1,623				6.8				4,972				4,946				0.5
Tax-equivalent net interest income (1)			19,015				18,128				4.9				56,513				52,925				6.8
Provision for loan losses			(27	)			406				NM				93				955				(90.3	)
Tax-equivalent NII after provision for loan loss (1)			19,042				17,722				7.4				56,420				51,970				8.6
Investment Securities gains			-				460				NM				-				931				NM
Non-interest income (excluding securities gains/losses)			7,982				8,896				(10.3	)			24,073				23,368				3.0
Non-interest expense			16,848				16,771				0.5				50,542				49,789				1.5
Income taxes			2,998				2,773				8.1				8,666				7,206				20.3
Net Income			6,696				7,069				(5.3	)			19,860				17,937				10.7
Tax equivalent adjustment (1)			482				465				3.7				1,425				1,337				6.6
At Period End
Assets			2,228,281				2,151,079				3.6
Earning assets			2,030,218				1,954,496				3.9
Loans			1,733,538				1,636,266				5.9
Allowance for loan losses			25,209				24,567				2.6
Deposits			1,793,053				1,730,645				3.6
Stockholders’ equity			278,556				278,233				0.1
Average Balances
Assets			2,222,843				2,153,226				3.2				2,205,135				2,155,027				2.3
Earning assets			2,000,284				1,934,651				3.4				1,983,526				1,941,412				2.2
Loans			1,696,370				1,586,652				6.9				1,672,393				1,561,118				7.1
Deposits and interest-bearing liabilities			1,918,587				1,853,271				3.5				1,899,943				1,857,139				2.3
Deposits			1,786,814				1,738,494				2.8				1,776,036				1,745,276				1.8
Stockholders’ equity			277,235				276,968				0.1				277,130				275,734				0.5
Stockholders’ equity / assets			12.47	%			12.86	%			(3.0	)			12.57	%			12.79	%			(1.8	)
Per Common Share Data
Net Income
Basic		$	0.72			$	0.75				(4.0	)		$	2.15			$	1.87				15.0
Diluted			0.72				0.71				1.4				2.11				1.79				17.9
Dividends			0.20				0.15				33.3				0.575				0.45				27.8
Market Value:
High		$	39.95			$	29.00				37.8			$	39.95			$	29.00				37.8
Low			35.03				26.99				29.8				29.05				24.24				19.8
Close			36.56				27.01				35.4				36.56				27.01				35.4
Common Book Value			30.37				29.60				2.6				30.37				29.60				2.6
Tangible Common Book Value			23.41				22.75				2.9				23.41				22.75				2.9
Shares outstanding, end of period (000)			9,172				9,371				(2.1	)			9,172				9,371				(2.1	)
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.78	%			3.73	%			1.5				3.82	%			3.65	%			4.6
Return on average assets			1.20	%			1.30	%			(8.2	)			1.20	%			1.11	%			8.2
Return on average equity			9.58	%			10.13	%			(5.4	)			9.58	%			8.70	%			10.2
Efficiency ratio (2)			62.41	%			62.06	%			0.6				62.72	%			65.26	%			(3.9	)
Effective tax rate			30.93	%			28.18	%			9.8				30.38	%			28.66	%			6.0
Dividend payout ratio (basic)			27.78	%			20.00	%			38.9				26.74	%			24.06	%			11.1

 

(1)

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

(2)

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

NM Percentage change not meaningful

 

  

Income from Mortgage Banking

 

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

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(dollars in thousands)		2015				2014				2015				2014
Gain from sale of mortgage loans		$	1,197			$	973			$	3,728			$	2,601
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			866				870				2,593				2,652
Amortization of mortgage servicing rights			(407	)			(366	)			(1,264	)			(1,026	)
Mortgage servicing rights valuation adjustments			24				68				191				105
			483				572				1,520				1,731
Total revenue from sale and servicing of mortgage loans		$	1,680			$	1,545			$	5,248			$	4,332

 

  

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended September 30,
		(dollars in thousands)
		2015												2014
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	1,696,370			$	18,472				4.32	%		$	1,586,652			$	17,406				4.35	%
Securities			236,485				2,105				3.63	%			235,459				2,144				3.70	%
Interest Bearing Deposits			53,627				33				0.24	%			98,738				64				0.26	%
FHLB stock			13,802				138				3.97	%			13,802				137				3.94	%
Total interest-earning assets			2,000,284				20,748				4.13	%			1,934,651				19,751				4.06	%
Non-interest-earning assets			222,559												218,575
Total assets		$	2,222,843											$	2,153,226
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,397,965			$	1,363				0.39	%		$	1,396,698			$	1,304				0.37	%
FHLB advances and other			41,047				178				1.72	%			21,872				131				2.38	%
Subordinated debentures			36,128				154				1.69	%			36,129				147				1.61	%
Notes payable			54,598				38				0.28	%			56,776				41				0.29	%
Total interest-bearing liabilities			1,529,738				1,733				0.45	%			1,511,475				1,623				0.43	%
Non-interest bearing deposits			388,849				-				-				341,796				-				-
Total including non-interest-bearing demand deposits			1,918,587				1,733				0.36	%			1,853,271				1,623				0.35	%
Other non-interest-bearing liabilities			27,021												22,987
Total liabilities			1,945,608												1,876,258
Stockholders' equity			277,235												276,968
Total liabilities and stockholders' equity		$	2,222,843											$	2,153,226
Net interest income; interest rate spread						$	19,015				3.68	%						$	18,128				3.63	%
Net interest margin (3)											3.78	%											3.73	%
Average interest-earning assets  to average interest bearing liabilities											131	%											128	%

 

		Nine Months Ended September 30,
		2015												2014
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	1,672,393			$	54,590				4.36	%		$	1,561,118			$	50,996				4.37	%
Securities			241,016				6,369				3.64	%			218,527				6,091				3.83	%
Interest Bearing Deposits			56,315				113				0.27	%			146,798				283				0.26	%
FHLB stock			13,802				413				4.00	%			14,969				502				4.48	%
Total interest-earning assets			1,983,526				61,485				4.16	%			1,941,412				57,872				3.99	%
Non-interest-earning assets			221,609												213,615
Total assets		$	2,205,135											$	2,155,027
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,396,731			$	3,947				0.38	%		$	1,401,481			$	3,989				0.38	%
FHLB advances and other			34,038				461				1.81	%			22,117				397				2.40	%
Subordinated debentures			36,129				451				1.67	%			36,132				439				1.62	%
Notes payable			53,740				113				0.28	%			53,614				121				0.30	%
Total interest-bearing liabilities			1,520,638				4,972				0.44	%			1,513,344				4,946				0.44	%
Non-interest bearing deposits			379,305				-				-				343,795				-				-
Total including non-interest-bearing demand deposits			1,899,943				4,972				0.35	%			1,857,139				4,946				0.36	%
Other non-interest-bearing liabilities			28,062												22,154
Total liabilities			1,928,005												1,879,293
Stockholders' equity			277,130												275,734
Total liabilities and stockholders' equity		$	2,205,135											$	2,155,027
Net interest income; interest rate spread						$	56,513				3.72	%						$	52,926				3.55	%
Net interest margin (3)											3.82	%											3.65	%
Average interest-earning assets  to average interest bearing liabilities											130	%											128	%

 

(1)

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

(2)

Annualized

(3)

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

 

  

Selected Quarterly Information

First Defiance Financial Corp.

 

(dollars in thousands, except per share data)		3rd Qtr 2015				2nd Qtr 2015				1st Qtr 2015				4th Qtr 2014				3rd Qtr 2014
Summary of Operations
Tax-equivalent interest income (1)		$	20,748			$	20,516			$	20,221			$	20,174			$	19,751
Interest expense			1,733				1,672				1,567				1,612				1,623
Tax-equivalent net interest income (1)			19,015				18,844				18,654				18,562				18,128
Provision for loan losses			(27	)			-				120				162				406
Tax-equivalent NII after provision for loan losses (1)			19,042				18,844				18,534				18,400				17,722
Investment securities gains, net of impairment			-				-				-				1				460
Non-interest income (excluding securities gains/losses)			7,982				7,809				8,281				7,341				8,896
Non-interest expense			16,848				16,796				16,897				16,969				16,771
Income taxes			2,998				2,815				2,853				1,957				2,773
Net income			6,696				6,563				6,601				6,355				7,069
Tax equivalent adjustment (1)			482				479				464				461				465
At Period End
Total assets		$	2,228,281			$	2,196,510			$	2,201,321			$	2,178,952			$	2,151,079
Earning assets			2,030,218				1,998,580				1,999,601				1,975,757				1,954,496
Loans			1,733,538				1,705,716				1,684,518				1,646,786				1,636,266
Allowance for loan losses			25,209				25,384				25,302				24,766				24,567
Deposits			1,793,053				1,763,390				1,772,693				1,760,813				1,730,645
Stockholders’ equity			278,556				276,028				273,117				279,505				278,233
Stockholders’ equity / assets			12.50	%			12.57	%			12.41	%			12.83	%			12.93	%
Goodwill			61,798				61,525				61,525				61,525				61,525
Average Balances
Total assets		$	2,222,843			$	2,212,603			$	2,179,576			$	2,184,792			$	2,153,226
Earning assets			2,000,284				1,991,830				1,958,463				1,964,074				1,934,651
Loans			1,696,370				1,673,750				1,647,059				1,615,657				1,586,652
Deposits and interest-bearing liabilities			1,918,587				1,909,372				1,871,871				1,879,918				1,853,271
Deposits			1,786,814				1,780,912				1,760,383				1,764,908				1,738,494
Stockholders’ equity			277,235				274,239				279,917				278,944				276,968
Stockholders’ equity / assets			12.47	%			12.39	%			12.84	%			12.77	%			12.86	%
Per Common Share Data
Net Income:
Basic		$	0.72			$	0.71			$	0.71			$	0.68			$	0.75
Diluted			0.72				0.70				0.69				0.65				0.71
Dividends			0.20				0.20				0.175				0.175				0.15
Market Value:
High		$	39.95			$	38.21			$	34.64			$	35.70			$	29.00
Low			35.03				32.42				29.05				26.95				26.99
Close			36.56				37.53				32.82				34.06				27.01
Common Book Value			30.37				29.76				29.53				30.17				29.60
Shares outstanding, end of period (in thousands)			9,172				9,275				9,248				9,235				9,371
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.78	%			3.81	%			3.88	%			3.76	%			3.73	%
Return on average assets			1.20	%			1.19	%			1.23	%			1.15	%			1.30	%
Return on average equity			9.58	%			9.60	%			9.56	%			9.04	%			10.13	%
Efficiency ratio (2)			62.41	%			63.02	%			62.73	%			65.51	%			62.06	%
Effective tax rate			30.93	%			30.02	%			30.18	%			23.54	%			28.18	%
Common dividend payout ratio (basic)			27.78	%			28.17	%			24.65	%			25.74	%			20.00	%

 

(1)

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

(2)

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

 

  

Selected Quarterly Information

First Defiance Financial Corp.

 

(dollars in thousands, except per share data)		3rd Qtr 2015				2nd Qtr 2015				1st Qtr 2015				4th Qtr 2014				3rd Qtr 2014
Loan Portfolio Composition
One to four family residential real estate		$	205,370			$	205,044			$	203,558			$	206,437			$	209,135
Construction			129,230				140,114				125,144				112,385				116,809
Commercial real estate			922,207				885,125				876,476				840,488				834,443
Commercial			402,681				401,247				395,378				399,730				392,465
Consumer finance			15,774				14,911				14,967				15,466				16,616
Home equity and improvement			113,781				109,694				110,755				111,813				111,151
Total loans			1,789,043				1,756,135				1,726,278				1,686,319				1,680,619
Less:
Loans in process			54,484				49,477				40,833				38,653				43,548
Deferred loan origination fees			1,021				942				927				880				805
Allowance for loan loss			25,209				25,384				25,302				24,766				24,567
Net Loans		$	1,708,329			$	1,680,332			$	1,659,216			$	1,622,020			$	1,611,699
Allowance for loan loss activity
Beginning allowance		$	25,384			$	25,302			$	24,766			$	24,567			$	24,627
Provision for loan losses			(27	)			0				120				162				406
Credit loss charge-offs:
One to four family residential real estate			185				11				78				61				95
Commercial real estate			64				146				155				505				246
Commercial			43				23				2				212				1,272
Consumer finance			5				13				3				1				16
Home equity and improvement			110				187				43				87				42
Total charge-offs			407				380				281				866				1,671
Total recoveries			259				462				697				903				1,205
Net charge-offs (recoveries)			148				(82	)			(416	)			(37	)			466
Ending allowance		$	25,209			$	25,384			$	25,302			$	24,766			$	24,567
Credit Quality
Total non-performing loans (1)		$	16,612			$	16,737			$	18,703			$	24,130			$	22,525
Real estate owned (REO)			4,936				5,371				6,392				6,181				5,326
Total non-performing assets (2)		$	21,548			$	22,108			$	25,095			$	30,311			$	27,851
Net charge-offs (recoveries)			148				(82	)			(416	)			(37	)			466
Restructured loans, accruing (3)			13,786				22,234				19,616				24,686				26,579
Allowance for loan losses / loans			1.45	%			1.49	%			1.50	%			1.50	%			1.50	%
Allowance for loan losses / non-performing assets			116.99	%			114.82	%			100.82	%			81.71	%			88.21	%
Allowance for loan losses / non-performing loans			151.75	%			151.66	%			135.28	%			102.64	%			109.07	%
Non-performing assets / loans plus REO			1.24	%			1.29	%			1.48	%			1.83	%			1.70	%
Non-performing assets / total assets			0.97	%			1.01	%			1.14	%			1.39	%			1.29	%
Net charge-offs / average loans (annualized)			0.03	%			-0.02	%			-0.10	%			-0.01	%			0.12	%
Deposit Balances
Non-interest-bearing demand deposits		$	392,103			$	378,970			$	370,997			$	379,552			$	340,575
Interest-bearing demand deposits and money market			745,233				722,813				737,533				727,729				739,292
Savings deposits			216,613				218,055				215,590				203,673				197,464
Retail time deposits less than $100,000			282,331				284,471				286,890				286,904				289,326
Retail time deposits greater than $100,000			156,773				159,081				161,683				162,955				163,988
Total deposits		$	1,793,053			$	1,763,390			$	1,772,693			$	1,760,813			$	1,730,645

 

(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, 2015
One to four family residential real estate		$	205,370			$	201,797			$	828			$	2,745
Construction			129,230				129,095				135				-
Commercial real estate			922,207				911,878				239				10,090
Commercial			402,681				399,547				17				3,117
Consumer finance			15,774				15,676				69				29
Home equity and improvement			113,781				112,620				530				631
Total loans		$	1,789,043			$	1,770,613			$	1,818			$	16,612
December 31, 2014
One to four family residential real estate		$	206,437			$	201,931			$	1,174			$	3,332
Construction			112,385				112,385				-				-
Commercial real estate			840,488				824,770				544				15,174
Commercial			399,730				394,671				66				4,993
Consumer finance			15,466				15,330				124				12
Home equity and improvement			111,813				109,993				1,201				619
Total loans		$	1,686,319			$	1,659,080			$	3,109			$	24,130
September 30, 2014
One to four family residential real estate		$	209,135			$	205,428			$	654			$	3,053
Construction			116,809				116,809				-				-
Commercial real estate			834,443				820,502				68				13,873
Commercial			392,465				386,266				669				5,530
Consumer finance			16,616				16,524				92				-
Home equity and improvement			111,151				109,937				1,145				69
Total loans		$	1,680,619			$	1,655,466			$	2,628			$	22,525