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 $2.82 PER SHARE FOR 2015,

UP 15.6% FROM FULL YEAR 2014

 

·

Earnings per share of $0.71 for 2015 fourth quarter, up from $0.65 per share in the fourth quarter of 2014

·

Net income of $6.6 million for 2015 fourth quarter compared to $6.4 million in the fourth quarter of 2014

·

Net interest margin of 3.77% for the 2015 fourth quarter, up from 3.76% in the fourth quarter of 2014

·

Loan growth $68.7 million during the 2015 fourth quarter

·

Deposit growth $43.1 million during the 2015 fourth quarter

·

Non-performing loans down 32.6% from 2014 year end

 

DEFIANCE, OHIO (January 18, 2016) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the fiscal year ended December 31, 2015 totaled $26.4 million, or $2.82 per diluted common share, compared to $24.3 million or $2.44 per diluted common share for the year ended December 31, 2014.

 

For the fourth quarter 2015, First Defiance earned $6.6 million, or $0.71 per diluted common share compared to $6.4 million; or $0.65 per diluted common share for the fourth quarter of 2014. Last year’s fourth quarter results were positively impacted by a $551,000 adjustment to the provision for income taxes to reflect the utilization of capital loss carryforwards.

 

“We are extremely pleased with our achievement of record earnings results for 2015 with earnings per diluted share up 15.6 percent over last year,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “We are particularly encouraged by our fourth quarter performance. Our profitability remained very strong, credit quality improved, and loan and deposit growth were both exceptional, which gives us good momentum and confidence for continued success in 2016.”

 

Net interest income up compared to fourth quarter 2014

 

Net interest income of $19.0 million in the fourth quarter of 2015 was up from $18.1 million in the fourth quarter of 2014. Net interest margin was 3.77% for the fourth quarter of 2015, down from 3.78% in the third quarter 2015, but up from 3.76% in the fourth quarter of 2014. Yield on interest earning assets increased by 3 basis points, to 4.12% in the fourth quarter of 2015 from 4.09% in the fourth quarter of 2014. The cost of interest-bearing liabilities increased by 4 basis points in the fourth quarter of 2015 to 0.46% from 0.42% in the fourth quarter of 2014.

 

 

“Our healthy loan growth in particular has enabled us to maintain a solid earning asset mix, steady net interest margin and growth in net interest income which increased $866,000, or 4.8% over the same quarter last year,” said Hileman. “We expect a challenging rate environment in 2016, but we believe we are well positioned to minimize the risks of potential rate changes ahead.”

 

Non-interest income up from fourth quarter 2014

 

First Defiance’s non-interest income for the fourth quarter of 2015 was $7.7 million compared with $7.3 million in the fourth quarter of 2014. Mortgage banking income increased to $1.5 million in the fourth quarter of 2015, up from $1.3 million in the fourth quarter of 2014 due to higher volumes of both purchase and refinance loans throughout our market area. Gains from the sale of mortgage loans increased in the fourth quarter of 2015 to $836,000 from $734,000 in the fourth quarter of 2014. Mortgage loan servicing revenue was $910,000 in the fourth quarter of 2015, up slightly from $900,000 in the fourth quarter of 2014. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $75,000 in the fourth quarter of 2015 compared with a positive adjustment of $11,000 in the fourth quarter of 2014.

 

For the fourth quarter 2015, service fees and other charges were $2.7 million, down slightly from $2.8 million in the fourth quarter of 2014; and commissions from the sale of insurance products were $2.3 million, up from $2.2 million in the fourth quarter 2014. Trust income was $367,000 in the fourth quarter of 2015, up from $345,000 in the fourth quarter of 2014.

 

“Our fourth quarter non-interest revenues grew $388,000, up 5.3% over the same period last year,” said Hileman. “Continued increases in mortgage banking origination levels, up 17% from a year ago, and growth in both insurance commissions and wealth management revenues contributed to this success.”

 

Non-interest expenses up from fourth quarter 2014

 

Total non-interest expense was $17.3 million in the fourth quarter of 2015, up from $17.0 million in the fourth quarter of 2014. Compensation and benefits increased to $9.9 million in the fourth quarter of 2015 compared to $9.1 million in the fourth quarter of 2014. The increase in compensation and benefits from a year ago is mainly related to higher incentive compensation, merit increases and staff additions for growth. Occupancy expense was $1.8 million in the fourth quarter 2015, up only $58,000 from the fourth quarter 2014. Data processing cost was $1.4 million in the fourth quarter of 2015, down $92,000 from the fourth quarter of 2014. Other non-interest expense of $3.3 million in the fourth quarter of 2015, decreased from $3.8 million in the fourth quarter of 2014 primarily due to reductions in OREO costs and management consulting.

 

Credit quality

 

Non-performing loans totaled $16.3 million at December 31, 2015, a decrease from $24.1 million at December 31, 2014. In addition, First Defiance had $1.3 million of real estate owned at December 31, 2015 compared to $6.2 million at December 31, 2014. Accruing troubled debt restructured loans were $11.2 million at December 31, 2015 compared with $24.7 million at December 31, 2014. For the fourth quarter of 2015, First Defiance recorded net recoveries of $129,000, compared to net recoveries of $37,000 in the fourth quarter of 2014. The allowance for loan loss as a percentage of total loans was 1.41% at December 31, 2015 compared with 1.50% at December 31, 2014.

 

 

The fourth quarter results include a provision for loan losses of $43,000 compared with an expense of $162,000 for the same period in 2014.

 

“Our progress on improving asset quality continued in the fourth quarter, as non-performing assets, including troubled debt restructurings, were reduced $6.6 million during the quarter, a 48% decrease from the prior year,” said Hileman. “This improvement, along with net recoveries on loans in the quarter, has enabled us to strengthen our allowance for loan losses coverage of non-performing loans to 156% and significantly contain our provision expense.”

 

Annual results

 

For the full year ended on December 31, 2015, net income totaled $26.4 million, or $2.82 per diluted common share, compared to $24.3 million or $2.44 per diluted common share for 2014.

 

Net interest income for 2015 totaled $74.1 million, compared with $69.7 million for 2014. Average interest-earning assets increased to $2.00 billion for 2015, compared to $1.95 billion in 2014. Net interest margin for 2015 was 3.81%, up 13 basis points from the 3.68% margin for 2014.

 

The provision for loan losses for 2015 was $136,000 compared to $1.1 million in 2014 as a result of the improved credit quality previously mentioned.

 

Non-interest income for the year 2015 was $31.8 million, compared to $31.6 million in 2014. Service fees and other charges were $10.8 million for 2015, up from $10.3 million in 2014. Mortgage banking income increased to $6.7 million for 2015, compared with $5.6 million in 2014. Gains on the sale of non-mortgage loans were $824,000 for 2015, compared with $181,000 during 2014. Insurance and investment sales revenues increased to $10.1 million for 2015, compared with $9.9 million for 2014. Non-interest income for 2015 included only $22,000 of net securities gains compared to $932,000 of net securities gains for 2014. In addition, 2014 included a $903,000 tax-free benefit from a bank-owned life insurance policy and a $498,000 tax-free gain recognized through the company’s deferred compensation plan trust.

 

Non-interest expense increased to $67.9 million for 2015 from $66.8 million in 2014. Compensation and benefits expense was $37.8 million for 2015 compared with $35.5 million for 2014. The increase in compensation and benefits over the prior year is mainly related to higher incentive compensation accruals, merit increases and new staff for growth strategies, partially offset by lower medical insurance costs. Increases in occupancy of $514,000, data processing of $227,000 and financial institutions taxes of $21,000 were offset by decreases in FDIC insurance premiums of $95,000, amortization of intangibles of $403,000 and other expenses of $1.4 million, which included a $786,000 cost recorded in the first quarter 2014 for terminating a merger agreement.

 

 

Total assets at $2.3 billion

 

Total assets at December 31, 2015 were $2.30 billion compared to $2.18 billion at December 31, 2014. Net loans receivable (excluding loans held for sale) were $1.78 billion at December 31, 2015 compared to $1.62 billion at December 31, 2014. Total cash and cash equivalents were $79.8 million at December 31, 2015 compared with $112.9 million at December 31, 2014. Also, at December 31, 2015, goodwill and other intangible assets totaled $63.7 million compared to $63.9 million at December 31, 2014.

 

Total deposits at December 31, 2015 were $1.84 billion compared with $1.76 billion at December 31, 2014. Non-interest bearing deposits at December 31, 2015 were $420.7 million compared to $379.6 million at December 31, 2014. Total stockholders’ equity was $280.2 million at December 31, 2015 compared to $279.5 million at December 31, 2014.

 

Dividend to be paid February 26

 

The Board of Directors declared a quarterly cash dividend of $0.22 per common share payable February 26, 2016 to shareholders of record at the close of business on February 19, 2016. The dividend represents an annual dividend of 2.39 percent based on the First Defiance common stock closing price on January 15, 2016. First Defiance has approximately 9,054,000 common shares outstanding.

 

Conference call

 

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, January 19, 2016 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. In addition, a live webcast may be accessed at http://services.choruscall.com/links/fdef160119.

 

Audio replay of the Internet Webcast will be available at www.fdef.com until February 19, 2016 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 34 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 December 31, 2015 consolidated financial statements as part of its Annual Report on Form 10-K to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

 

 

Consolidated Balance Sheets (Unaudited)

First Defiance Financial Corp.

 

		December 31,				December 31,
(in thousands)		2015				2014
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	38,769			$	41,936
Interest-bearing deposits			41,000				71,000
			79,769				112,936
Securities
Available-for sale, carried at fair value			236,435				239,321
Held-to-maturity, carried at amortized cost			243				313
			236,678				239,634
Loans			1,802,217				1,646,786
Allowance for loan losses			(25,382	)			(24,766	)
Loans, net			1,776,835				1,622,020
Loans held for sale			5,523				4,535
Mortgage servicing rights			9,248				9,012
Accrued interest receivable			6,171				6,037
Federal Home Loan Bank stock			13,801				13,802
Bank Owned Life Insurance			51,908				47,013
Office properties and equipment			38,165				40,496
Real estate and other assets held for sale			1,321				6,181
Goodwill			61,798				61,525
Core deposit and other intangibles			1,871				2,395
Other assets			14,588				13,366
Total Assets		$	2,297,676			$	2,178,952
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	420,691			$	379,552
Interest-bearing deposits			1,415,446				1,381,261
Total deposits			1,836,137				1,760,813
Advances from Federal Home Loan Bank			59,902				21,544
Notes payable and other interest-bearing liabilities			57,188				54,759
Subordinated debentures			36,083				36,083
Advance payments by borrowers for tax and insurance			2,674				2,309
Deferred Taxes			823				1,176
Other liabilities			24,672				22,763
Total Liabilities			2,017,479				1,899,447
Stockholders’ Equity
Preferred stock			-				-
Common stock, net			127				127
Common stock warrant			-				878
Additional paid-in-capital			125,734				136,266
Accumulated other comprehensive income			3,622				4,114
Retained earnings			219,737				200,600
Treasury stock, at cost			(69,023	)			(62,480	)
Total stockholders’ equity			280,197				279,505
Total Liabilities and Stockholders’ Equity		$	2,297,676			$	2,178,952

 

 

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)		2015				2014				2015				2014
Interest Income:
Loans		$	18,901			$	17,788			$	73,346			$	68,682
Investment securities			1,680				1,719				6,769				6,575
Interest-bearing deposits			56				66				169				349
FHLB stock dividends			139				140				552				642
Total interest income			20,776				19,713				80,836				76,248
Interest Expense:
Deposits			1,394				1,293				5,341				5,283
FHLB advances and other			214				131				675				528
Subordinated debentures			162				148				613				587
Notes Payable			39				40				152				161
Total interest expense			1,809				1,612				6,781				6,559
Net interest income			18,967				18,101				74,055				69,689
Provision for loan losses			43				162				136				1,117
Net interest income after provision for loan losses			18,924				17,939				73,919				68,572
Non-interest Income:
Service fees and other charges			2,734				2,766				10,752				10,258
Mortgage banking income			1,465				1,270				6,713				5,602
Gain on sale of non-mortgage loans			48				102				824				181
Gain on sale of securities			22				1				22				932
Insurance commissions			2,283				2,219				10,076				9,859
Trust income			367				345				1,462				1,240
Income from Bank Owned Life Insurance			237				218				895				1,802
Other non-interest income			574				421				1,059				1,767
Total Non-interest Income			7,730				7,342				31,803				31,641
Non-interest Expense:
Compensation and benefits			9,873				9,075				37,769				35,543
Occupancy			1,836				1,778				7,197				6,683
FDIC insurance premium			325				332				1,324				1,419
Financial institutions tax			443				239				1,783				1,762
Data processing			1,431				1,523				6,083				5,856
Amortization of intangibles			163				269				699				1,102
Other non-interest expense			3,276				3,753				13,034				14,393
Total Non-interest Expense			17,347				16,969				67,889				66,758
Income before income taxes			9,307				8,312				37,833				33,455
Income taxes			2,744				1,957				11,410				9,163
Net Income		$	6,563			$	6,355			$	26,423			$	24,292
Earnings per common share:
Basic		$	0.72			$	0.68			$	2.87			$	2.55
Diluted		$	0.71			$	0.65			$	2.82			$	2.44
Average Shares Outstanding:
Basic			9,146				9,316				9,221				9,511
Diluted			9,235				9,801				9,383				9,975

 

 

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)		2015				2014				% change				2015				2014				% change
Summary of Operations
Tax-equivalent interest income (1)		$	21,256			$	20,174				5.4	%		$	82,741			$	78,046				6.0	%
Interest expense			1,809				1,612				12.2				6,781				6,559				3.4
Tax-equivalent net interest income (1)			19,447				18,562				4.8				75,960				71,487				6.3
Provision for loan losses			43				162				(73.5	)			136				1,117				(87.8	)
Tax-equivalent NII after provision for loan loss (1)			19,404				18,400				5.5				75,824				70,370				7.8
Investment Securities gains			22				1				NM				22				932				(97.6	)
Non-interest income (excluding securities gains/losses)			7,708				7,341				5.0				31,781				30,709				3.5
Non-interest expense			17,347				16,969				2.2				67,889				66,758				1.7
Income taxes			2,744				1,957				40.2				11,410				9,163				24.5
Net Income			6,563				6,355				3.3				26,423				24,292				8.8
Tax equivalent adjustment (1)			480				461				4.1				1,905				1,798				6.0
At Period End
Assets			2,297,676				2,178,952				5.4
Earning assets			2,099,219				1,975,757				6.2
Loans			1,802,217				1,646,786				9.4
Allowance for loan losses			25,382				24,766				2.5
Deposits			1,836,137				1,760,813				4.3
Stockholders’ equity			280,197				279,505				0.2
Average Balances
Assets			2,276,060				2,184,792				4.2				2,222,866				2,162,468				2.8
Earning assets			2,051,331				1,964,074				4.4				2,000,477				1,947,078				2.7
Loans			1,732,472				1,615,657				7.2				1,687,413				1,574,753				7.2
Deposits and interest-bearing liabilities			1,967,199				1,879,918				4.6				1,916,758				1,862,834				2.9
Deposits			1,823,396				1,764,908				3.3				1,787,876				1,750,184				2.2
Stockholders’ equity			279,192				278,944				0.1				277,645				276,537				0.4
Stockholders’ equity / assets			12.27	%			12.77	%			(3.9	)			12.49	%			12.79	%			(2.3	)
Per Common Share Data
Net Income
Basic		$	0.72			$	0.68				5.9			$	2.87			$	2.55				12.5
Diluted			0.71				0.65				9.2				2.82				2.44				15.6
Dividends			0.20				0.175				14.3				0.775				0.625				24.0
Market Value:
High		$	42.46			$	35.70				18.9			$	42.46			$	35.70				18.9
Low			35.01				26.95				29.9				29.05				24.24				19.8
Close			37.78				34.06				10.9				37.78				34.06				10.9
Common Book Value			30.78				30.17				2.0				30.78				30.17				2.0
Tangible Common Book Value			23.79				23.25				2.3				23.79				23.25				2.3
Shares outstanding, end of period (000)			9,102				9,235				(1.4	)			9,102				9,235				(1.4	)
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.77	%			3.76	%			0.3				3.81	%			3.68	%			3.5
Return on average assets			1.14	%			1.15	%			(0.9	)			1.19	%			1.12	%			5.8
Return on average equity			9.33	%			9.04	%			3.2				9.52	%			8.78	%			8.3
Efficiency ratio (2)			63.88	%			65.51	%			(2.5	)			63.01	%			65.32	%			(3.5	)
Effective tax rate			29.48	%			23.54	%			25.2				30.16	%			27.39	%			10.1
Dividend payout ratio (basic)			27.78	%			25.74	%			7.9				27.00	%			24.51	%			10.2

 

(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)		2015				2014				2015				2014
Gain from sale of mortgage loans		$	836			$	734			$	4,564			$	3,335
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			910				900				3,503				3,552
Amortization of mortgage servicing rights			(356	)			(375	)			(1,620	)			(1,401	)
Mortgage servicing rights valuation adjustments			75				11				266				116
			629				536				2,149				2,267
Total revenue from sale and servicing of mortgage loans		$	1,465			$	1,270			$	6,713			$	5,602

 

 

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended December 31,
		(dollars in thousands)
		2015												2014
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	1,732,472			$	18,954				4.34	%		$	1,615,657			$	17,833				4.38	%
Securities			236,361				2,107				3.64	%			238,553				2,135				3.65	%
Interest Bearing Deposits			68,697				56				0.32	%			96,062				66				0.27	%
FHLB stock			13,801				139				4.00	%			13,802				140				4.02	%
Total interest-earning assets			2,051,331				21,256				4.12	%			1,964,074				20,174				4.09	%
Non-interest-earning assets			224,729												220,718
Total assets		$	2,276,060											$	2,184,792
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,408,283			$	1,394				0.39	%		$	1,393,584			$	1,293				0.37	%
FHLB advances and other			50,419				214				1.68	%			21,628				131				2.40	%
Subordinated debentures			36,128				162				1.78	%			36,128				148				1.63	%
Notes payable			57,256				39				0.27	%			57,254				40				0.28	%
Total interest-bearing liabilities			1,552,086				1,809				0.46	%			1,508,594				1,612				0.42	%
Non-interest bearing deposits			415,113				-				-				371,324				-				-
Total including non-interest-bearing demand deposits			1,967,199				1,809				0.36	%			1,879,918				1,612				0.34	%
Other non-interest-bearing liabilities			29,669												25,930
Total liabilities			1,996,868												1,905,848
Stockholders' equity			279,192												278,944
Total liabilities and stockholders' equity		$	2,276,060											$	2,184,792
Net interest income; interest rate spread						$	19,447				3.66	%						$	18,562				3.67	%
Net interest margin (3)											3.77	%											3.76	%
Average interest-earning assets  to average interest bearing liabilities											132	%											130	%

 

		Twelve Months Ended December 31,
		2015												2014
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	1,687,413			$	73,544				4.36	%		$	1,574,753			$	68,828				4.37	%
Securities			239,852				8,476				3.64	%			223,534				8,227				3.79	%
Interest Bearing Deposits			59,410				169				0.28	%			134,114				349				0.26	%
FHLB stock			13,802				552				4.00	%			14,677				642				4.37	%
Total interest-earning assets			2,000,477				82,741				4.15	%			1,947,078				78,046				4.01	%
Non-interest-earning assets			222,389												215,390
Total assets		$	2,222,866											$	2,162,468
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,399,619			$	5,341				0.38	%		$	1,399,507			$	5,283				0.38	%
FHLB advances and other			38,134				675				1.77	%			21,995				528				2.40	%
Subordinated debentures			36,129				613				1.70	%			36,131				587				1.62	%
Notes payable			54,619				152				0.28	%			54,524				161				0.30	%
Total interest-bearing liabilities			1,528,501				6,781				0.44	%			1,512,157				6,559				0.43	%
Non-interest bearing deposits			388,257				-				-				350,677				-				-
Total including non-interest-bearing demand deposits			1,916,758				6,781				0.35	%			1,862,834				6,559				0.35	%
Other non-interest-bearing liabilities			28,463												23,097
Total liabilities			1,945,221												1,885,931
Stockholders' equity			277,645												276,537
Total liabilities and stockholders' equity		$	2,222,866											$	2,162,468
Net interest income; interest rate spread						$	75,960				3.71	%						$	71,487				3.57	%
Net interest margin (3)											3.81	%											3.68	%
Average interest-earning assets  to average interest bearing liabilities											131	%											129	%

 

(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 2015				3rd Qtr 2015				2nd Qtr 2015				1st Qtr 2015				4th Qtr 2014
Summary of Operations
Tax-equivalent interest income (1)		$	21,256			$	20,748			$	20,516			$	20,221			$	20,174
Interest expense			1,809				1,733				1,672				1,567				1,612
Tax-equivalent net interest income (1)			19,447				19,015				18,844				18,654				18,562
Provision for loan losses			43				(27	)			-				120				162
Tax-equivalent NII after provision for loan losses (1)			19,404				19,042				18,844				18,534				18,400
Investment securities gains, net of impairment			22				-				-				-				1
Non-interest income (excluding securities gains/losses)			7,708				7,982				7,809				8,281				7,341
Non-interest expense			17,347				16,848				16,796				16,897				16,969
Income taxes			2,744				2,998				2,815				2,853				1,957
Net income			6,563				6,696				6,563				6,601				6,355
Tax equivalent adjustment (1)			480				482				479				464				461
At Period End
Total assets		$	2,297,676			$	2,228,281			$	2,196,510			$	2,201,321			$	2,178,952
Earning assets			2,099,219				2,030,218				1,998,580				1,999,601				1,975,757
Loans			1,802,217				1,733,538				1,705,716				1,684,518				1,646,786
Allowance for loan losses			25,382				25,209				25,384				25,302				24,766
Deposits			1,836,137				1,793,053				1,763,390				1,772,693				1,760,813
Stockholders’ equity			280,197				278,556				276,028				273,117				279,505
Stockholders’ equity / assets			12.19	%			12.50	%			12.57	%			12.41	%			12.83	%
Goodwill			61,798				61,798				61,525				61,525				61,525
Average Balances
Total assets		$	2,276,060			$	2,222,843			$	2,212,603			$	2,179,576			$	2,184,792
Earning assets			2,051,331				2,000,284				1,991,830				1,958,463				1,964,074
Loans			1,732,472				1,696,370				1,673,750				1,647,059				1,615,657
Deposits and interest-bearing liabilities			1,967,199				1,918,587				1,909,372				1,871,871				1,879,918
Deposits			1,823,396				1,786,814				1,780,912				1,760,383				1,764,908
Stockholders’ equity			279,192				277,235				274,239				279,917				278,944
Stockholders’ equity / assets			12.27	%			12.47	%			12.39	%			12.84	%			12.77	%
Per Common Share Data
Net Income:
Basic		$	0.72			$	0.72			$	0.71			$	0.71			$	0.68
Diluted			0.71				0.72				0.70				0.69				0.65
Dividends			0.20				0.20				0.200				0.175				0.175
Market Value:
High		$	42.46			$	39.95			$	38.21			$	34.64			$	35.70
Low			35.01				35.03				32.42				29.05				26.95
Close			37.78				36.56				37.53				32.82				34.06
Common Book Value			30.78				30.37				29.76				29.53				30.17
Shares outstanding, end of period (in thousands)			9,102				9,172				9,275				9,248				9,235
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.77	%			3.78	%			3.81	%			3.88	%			3.76	%
Return on average assets			1.14	%			1.20	%			1.19	%			1.23	%			1.15	%
Return on average equity			9.33	%			9.58	%			9.60	%			9.56	%			9.04	%
Efficiency ratio (2)			63.88	%			62.41	%			63.02	%			62.73	%			65.51	%
Effective tax rate			29.48	%			30.93	%			30.02	%			30.18	%			23.54	%
Common dividend payout ratio (basic)			27.78	%			27.78	%			28.17	%			24.65	%			25.74	%

 

(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 2015				3rd Qtr 2015				2nd Qtr 2015				1st Qtr 2015				4th Qtr 2014
Loan Portfolio Composition
One to four family residential real estate		$	205,330			$	205,370			$	205,044			$	203,558			$	206,437
Construction			163,877				129,230				140,114				125,144				112,385
Commercial real estate			948,428				922,207				885,125				876,476				840,488
Commercial			419,349				402,681				401,247				395,378				399,730
Consumer finance			16,281				15,774				14,911				14,967				15,466
Home equity and improvement			116,962				113,781				109,694				110,755				111,813
Total loans			1,870,227				1,789,043				1,756,135				1,726,278				1,686,319
Less:
Loans in process			66,902				54,484				49,477				40,833				38,653
Deferred loan origination fees			1,108				1,021				942				927				880
Allowance for loan loss			25,382				25,209				25,384				25,302				24,766
Net Loans		$	1,776,835			$	1,708,329			$	1,680,332			$	1,659,216			$	1,622,020
Allowance for loan loss activity
Beginning allowance		$	25,209			$	25,384			$	25,302			$	24,766			$	24,567
Provision for loan losses			43				(27	)			0				120				162
Credit loss charge-offs:
One to four family residential real estate			8				185				11				78				61
Commercial real estate			103				64				146				155				505
Commercial			-				43				23				2				212
Consumer finance			32				5				13				3				1
Home equity and improvement			10				110				187				43				87
Total charge-offs			153				407				380				281				866
Total recoveries			282				259				462				697				903
Net charge-offs (recoveries)			(129	)			148				(82	)			(416	)			(37	)
Ending allowance		$	25,382			$	25,209			$	25,384			$	25,302			$	24,766
Credit Quality
Total non-performing loans (1)		$	16,261			$	16,612			$	16,737			$	18,703			$	24,130
Real estate owned (REO)			1,321				4,936				5,371				6,392				6,181
Total non-performing assets (2)		$	17,582			$	21,548			$	22,108			$	25,095			$	30,311
Net charge-offs (recoveries)			(129	)			148				(82	)			(416	)			(37	)
Restructured loans, accruing (3)			11,178				13,786				22,234				19,616				24,686
Allowance for loan losses / loans			1.41	%			1.45	%			1.49	%			1.50	%			1.50	%
Allowance for loan losses / non-performing assets			144.36	%			116.99	%			114.82	%			100.82	%			81.71	%
Allowance for loan losses / non-performing loans			156.09	%			151.75	%			151.66	%			135.28	%			102.64	%
Non-performing assets / loans plus REO			0.97	%			1.24	%			1.29	%			1.48	%			1.83	%
Non-performing assets / total assets			0.77	%			0.97	%			1.01	%			1.14	%			1.39	%
Net charge-offs / average loans (annualized)			-0.03	%			0.03	%			-0.02	%			-0.10	%			-0.01	%
Deposit Balances
Non-interest-bearing demand deposits		$	420,691			$	392,103			$	378,970			$	370,997			$	379,552
Interest-bearing demand deposits and money market			767,201				745,233				722,813				737,533				727,729
Savings deposits			219,655				216,613				218,055				215,590				203,673
Retail time deposits less than $100,000			278,707				282,331				284,471				286,890				286,904
Retail time deposits greater than $100,000			149,883				156,773				159,081				161,683				162,955
Total deposits		$	1,836,137			$	1,793,053			$	1,763,390			$	1,772,693			$	1,760,813

 

(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, 2015
One to four family residential real estate		$	205,330			$	201,806			$	914			$	2,610
Construction			163,877				163,877				-				-
Commercial real estate			948,428				937,844				736				9,848
Commercial			419,349				416,114				157				3,078
Consumer finance			16,281				16,215				30				36
Home equity and improvement			116,962				115,465				808				689
Total loans		$	1,870,227			$	1,851,321			$	2,645			$	16,261
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