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 2016

SECOND QUARTER EARNINGS

 

·

Diluted earnings per share of $0.80 for 2016 second quarter up, from $0.70 in the 2015 second quarter

·

Net income of $7.3 million for 2016 second quarter up, from $6.6 million in the 2015 second quarter

·

Return on average assets of 1.22% for the 2016 second quarter, up from 1.19% in the 2015 second quarter

·

Net interest margin of 3.71% for the 2016 second quarter, compared to 3.81% in the 2015 second quarter

·

Loan growth of $36.4 million during 2016 second quarter

·

Deposit growth of $49.1 million during 2016 second quarter

·

Non-performing assets down 21% from 2015 second quarter

 

DEFIANCE, OHIO (July 18, 2016) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the second quarter ended June 30, 2016 totaled $7.3 million, or $0.80 per diluted common share, compared to $6.6 million or $0.70 per diluted common share for the quarter ended June 30, 2015.

 

“Our very strong financial performance results for the second quarter reflect our continued success in growing profitably,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “At quarter-end, our total assets exceeded $2.4 billion, up 9.7% from a year ago; and second quarter diluted earnings per share grew to $0.80, a 14.3% increase over second quarter last year.”

 

Net Interest Income up Compared to Second Quarter 2015

 

Net interest income of $19.4 million in the second quarter of 2016 was up from $18.4 million in the second quarter of 2015. Net interest margin was 3.71% for the second quarter of 2016, down from 3.80% in the first quarter of 2016, and down from 3.81% in the second quarter of 2015. Yield on interest earning assets decreased by 5 basis points, to 4.10% in the second quarter of 2016 from 4.15% in the second quarter of 2015. The cost of interest-bearing liabilities increased by 7 basis points in the second quarter of 2016 to 0.51% from 0.44% in the second quarter of 2015.

 

 

“Our healthy growth momentum continued in the second quarter. Loan growth was $36.4 million as steady loan demand persisted across our market area, and deposit growth of $49.1 million was generated by our relationship sales and service model,” said Hileman. “This combination kept our balance sheet and net interest margin strong resulting in net interest income rising $1.0 million, or 5.6% over the second quarter last year.”

 

Non-Interest Income up from Second Quarter 2015

 

First Defiance’s non-interest income for the second quarter of 2016 was $8.6 million compared with $7.8 million in the second quarter of 2015. The second quarter of 2016 included gains of $227,000 from the sale of securities, compared to no gains or losses in the second quarter of 2015.

 

Mortgage banking income was $1.8 million in the second quarter of 2016, even with $1.8 million in the second quarter of 2015. Mortgage originations totaled $76.0 million in the second quarter of 2016, up seasonally from the first quarter of 2016 but down slightly from $76.9 million in the same quarter last year. Gains from the sale of mortgage loans increased in the second quarter of 2016 to $1.4 million from $1.2 million in the second quarter of 2015. Mortgage loan servicing revenue was $876,000 in the second quarter of 2016, up slightly from $852,000 in the second quarter of 2015. First Defiance had a negative change in the valuation adjustment in mortgage servicing assets of $104,000 in the second quarter of 2016 compared with a positive adjustment of $141,000 in the second quarter of 2015. In addition, gains on the sale of non-mortgages, which include SBA and FSA loans, totaled $411,000 in the second quarter 2016 compared to $197,000 in the second quarter 2015.

 

For the second quarter of 2016, commissions from the sale of insurance products was $2.5 million, up from $2.3 million in the second quarter of 2015; and service fees and other charges were $2.8 million in the second quarter of 2016, up from $2.7 million in the second quarter of 2015. Trust income was $409,000 in the second quarter of 2016, up 11.4% from $367,000 in the second quarter of 2015.

 

“Non-interest income growth this quarter included contributions from all major business lines with mortgage banking, service fees, insurance commissions and trust income all reflecting solid increases in core revenues over the second quarter last year,” continued Hileman. “Total non-interest income, excluding securities gains, rose 6.9% over this same period in the prior year.”

 

Non-Interest Expenses up from Second Quarter 2015

 

Total non-interest expense was $17.3 million in the second quarter of 2016, an increase from $16.8 million in the second quarter of 2015. Compensation and benefits increased to $9.8 million in the second quarter of 2016, compared to $9.2 million in the second quarter of 2015. The increase in compensation and benefits from a year ago is mainly related to merit increases, staff additions to support growth strategies and higher medical insurance costs. Occupancy expense was $1.8 million and data processing costs were $1.6 million, both even with the second quarter of 2015. Other non-interest expense of $3.2 million in the second quarter of 2016 was down from $3.3 million in the second quarter of 2015, primarily due to OREO write-downs of $182,000 in the second quarter of 2015 compared to none in the second quarter of 2016.

 

 

Credit Quality

 

Non-performing loans totaled $16.4 million at June 30, 2016, a decrease from $16.7 million at June 30, 2015. In addition, First Defiance had $1.1 million of real estate owned at June 30, 2016 compared to $5.4 million at June 30, 2015. Accruing troubled debt restructured loans were $9.6 million at June 30, 2016 compared with $22.2 million at June 30, 2015. For the second quarter of 2016, First Defiance recorded net recoveries of $227,000, compared to net recoveries of $82,000 in the second quarter of 2015. The allowance for loan loss as a percentage of total loans was 1.39% at June 30, 2016 compared with 1.49% at June 30, 2015.

 

The second quarter 2016 results include a provision for loan losses of $53,000 compared with no provision expense for the same period in 2015.

 

“We are pleased that our credit quality continues to strengthen as we grow our loan portfolio,” said Hileman. “Our total non-performing assets declined in the second quarter to 0.73% of total assets and reflect a 20.8% decrease from a year ago. In addition, our allowance for loan losses coverage of our non-performing loans now stands at 158.0%.”

 

Year-To-Date Results

 

For the six-month period ended June 30, 2016, net income totaled $14.4 million, or $1.59 per diluted common share, compared to $13.2 million, or $1.39 per diluted common share for the six months ended June 30, 2015.

 

The year-to-date net income for 2016 includes the second quarter adoption of ASU 2016-09, Improvements to Employee Share-based Payment Accounting. As a result of adoption, the first quarter 2016 net income was restated to reflect a $99,000 reduction to tax expense, which increased first quarter of 2016 net income by $99,000, or $0.01 per diluted common share.

 

Net interest income was $38.6 million for the first six months of 2016 compared with $36.6 million in the first six months of 2015. Average interest-earning assets increased to $2.126 billion in the first six months of 2016, compared to $1.975 billion in the first six months of 2015. Net interest margin for the first six months of 2016 was 3.75%, down 9 basis points from the 3.84% margin reported in the six month period ended June 30, 2015.

 

The provision for loan losses in the first six months of 2016 was $417,000, compared to $120,000 recorded during the first six months of 2015.

 

Non-interest income for the first six months of 2016 was $17.2 million, compared to $16.1 million during the same period of 2015. Service fees and other charges were $5.4 million for the first six months of 2016, up from $5.2 million during the same period of 2015. Mortgage banking income decreased to $3.3 million for the first six months of 2016, compared with $3.6 million during the same period of 2015. Insurance commissions rose to $5.6 million for the first six months of 2016, compared with $5.5 million for the same period of 2015. Non-interest income for the first six months of 2016 included $358,000 of gains on the sale of securities compared with no securities gains or losses during the same period of 2015.

 

 

Non-interest expense was $34.6 million for the first six months of 2016, up from $33.7 million for the same period of 2015. Compensation and benefits expense was $20.0 million for the first six months of 2016 compared with $18.1 million during the same period of 2015. The increase in compensation and benefits over the prior year is mainly related to merit increases, staff additions to support growth strategies and higher medical insurance costs. Expenses also included an increase in occupancy of $40,000 and decreases in FDIC insurance premiums of $14,000, data processing of $20,000, amortization of intangibles of $75,000 and other expenses of $854,000. The decrease in other expenses was due to $705,000 of OREO write-downs in 2015 compared to only $53,000 in 2016 and lower management consulting costs.

 

Total Assets at $2.4 Billion

 

Total assets at June 30, 2016 were $2.41 billion compared to $2.30 billion at December 31, 2015 and $2.20 billion at June 30, 2015. Loans receivable (excluding loans held for sale) were $1.86 billion at June 30, 2016 compared to $1.80 billion at December 31, 2015 and $1.71 billion at June 30, 2015. Total cash and cash equivalents were $130.5 million at June 30, 2016 compared with $79.8 million at December 31, 2015 and $65.6 million at June 30, 2015. Also, at June 30, 2016, goodwill and other intangible assets totaled $63.4 million compared to $63.7 million at December 31, 2015 and $63.5 million at June 30, 2015.

 

Total deposits at June 30, 2016 were $1.92 billion compared with $1.84 billion at December 31, 2015 and $1.76 billion at June 30, 2015. Non-interest bearing deposits at June 30, 2016 were $442.8 million compared to $420.7 million at December 31, 2015 and $379.0 million at June 30, 2015. Total stockholders’ equity was $286.6 million at June 30, 2016 compared to $280.2 million at December 31, 2015 and $276.0 million at June 30, 2015.

 

Dividend to be Paid August 26

 

The Board of Directors declared a quarterly cash dividend of $0.22 per common share payable August 26, 2016 to shareholders of record at the close of business on August 19, 2016. The dividend represents an annual dividend of 2.23 percent based on the First Defiance common stock closing price on July 15, 2016. First Defiance has approximately 8,971,418 common shares outstanding.

 

Conference Call

 

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, July 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/ fdef160719.

 

Audio replay of the Internet Webcast will be available at www.fdef.com until July 19, 2017 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 Bank operates 34 full-service branches and numerous 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, 2015. One or more of these factors have affected or could in the future affect First Defiance's business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by First Defiance or any other persons, that our objectives and plans will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of First Defiance. We assume no obligation to update any forward-looking statements.

 

As required by U.S. GAAP, First Defiance will evaluate the impact of subsequent events through the issuance date of its June 30, 2016 consolidated financial statements as part of its Quarterly Report on Form 10-Q to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

 

 

 

Consolidated Balance Sheets (Unaudited)

First Defiance Financial Corp.

 

		June 30,				December 31,
(in thousands)		2016				2015
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions		$	46,546			$	38,769
Interest-bearing deposits			84,000				41,000
			130,546				79,769
Securities
Available-for sale, carried at fair value			227,974				236,435
Held-to-maturity, carried at amortized cost			198				243
			228,172				236,678
Loans			1,861,403				1,802,217
Allowance for loan losses			(25,948	)			(25,382	)
Loans, net			1,835,455				1,776,835
Loans held for sale			13,142				5,523
Mortgage servicing rights			9,136				9,248
Accrued interest receivable			6,421				6,171
Federal Home Loan Bank stock			13,800				13,801
Bank Owned Life Insurance			52,369				51,908
Office properties and equipment			37,571				38,166
Real estate and other assets held for sale			1,079				1,321
Goodwill			61,798				61,798
Core deposit and other intangibles			1,567				1,871
Other assets			18,543				14,587
Total Assets		$	2,409,599			$	2,297,676
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits		$	442,811			$	420,691
Interest-bearing deposits			1,477,459				1,415,446
Total deposits			1,920,270				1,836,137
Advances from Federal Home Loan Bank			84,425				59,902
Notes payable and other interest-bearing liabilities			52,989				57,188
Subordinated debentures			36,083				36,083
Advance payments by borrowers for tax and insurance			1,775				2,674
Deferred Taxes			1,885				877
Other liabilities			25,556				24,618
Total Liabilities			2,122,983				2,017,479
Stockholders’ Equity
Preferred stock			-				-
Common stock, net			127				127
Common stock warrant			-				-
Additional paid-in-capital			125,877				125,734
Accumulated other comprehensive income			5,020				3,622
Retained earnings			230,132				219,737
Treasury stock, at cost			(74,540	)			(69,023	)
Total stockholders’ equity			286,616				280,197
Total Liabilities and Stockholders’ Equity		$	2,409,599			$	2,297,676

 

 

Consolidated Statements of Income (Unaudited)

First Defiance Financial Corp.

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands, except per share amounts)		2016				2015				2016				2015
Interest Income:
Loans		$	19,666			$	18,139			$	38,978			$	36,026
Investment securities			1,543				1,721				3,173				3,413
Interest-bearing deposits			134				41				183				80
FHLB stock dividends			137				136				276				275
Total interest income			21,480				20,037				42,610				39,794
Interest Expense:
Deposits			1,545				1,312				2,978				2,584
FHLB advances and other			321				173				618				283
Subordinated debentures			182				150				357				297
Notes Payable			36				37				73				75
Total interest expense			2,084				1,672				4,026				3,239
Net interest income			19,396				18,365				38,584				36,555
Provision for loan losses			53				-				417				120
Net interest income after provision for loan losses			19,343				18,365				38,167				36,435
Non-interest Income:
Service fees and other charges			2,799				2,690				5,443				5,219
Mortgage banking income			1,764				1,793				3,303				3,568
Gain on sale of non-mortgage loans			411				197				456				233
Gain on sale of securities			227				-				358				-
Insurance commissions			2,504				2,344				5,640				5,483
Trust income			409				367				836				725
Income from Bank Owned Life Insurance			230				212				461				420
Other non-interest income			231				206				714				443
Total Non-interest Income			8,575				7,809				17,211				16,091
Non-interest Expense:
Compensation and benefits			9,770				9,182				19,955				18,105
Occupancy			1,828				1,809				3,613				3,573
FDIC insurance premium			329				319				656				670
Financial institutions tax			447				411				893				893
Data processing			1,641				1,599				3,101				3,121
Amortization of intangibles			147				162				304				379
Other non-interest expense			3,185				3,314				6,099				6,953
Total Non-interest Expense			17,347				16,796				34,621				33,694
Income before income taxes			10,571				9,378				20,757				18,832
Income taxes			3,307				2,815				6,324				5,668
Net Income		$	7,264			$	6,563			$	14,433			$	13,164
Earnings per common share:
Basic		$	0.81			$	0.71			$	1.61			$	1.42
Diluted		$	0.80			$	0.70			$	1.59			$	1.39
Average Shares Outstanding:
Basic			8,968				9,268				8,981				9,251
Diluted			9,036				9,349				9,050				9,483

 

 

Financial Summary and Comparison (Unaudited)

First Defiance Financial Corp.

 

		Three Months Ended												Six Months Ended
		June 30,												June 30,
(dollars in thousands, except per share data)		2016				2015				% change				2016				2015				% change
Summary of Operations
Tax-equivalent interest income (1)		$	21,940			$	20,516				6.9	%		$	43,545			$	40,737				6.9	%
Interest expense			2,084				1,672				24.6				4,026				3,239				24.3
Tax-equivalent net interest income (1)			19,856				18,844				5.4				39,519				37,498				5.4
Provision for loan losses			53				-				NM				417				120				247.5
Tax-equivalent NII after provision for loan loss (1)			19,803				18,844				5.1				39,102				37,378				4.6
Investment Securities gains			227				-				NM				358				-				NM
Non-interest income (excluding securities gains/losses)			8,348				7,809				6.9				16,853				16,091				4.7
Non-interest expense			17,347				16,796				3.3				34,621				33,694				2.8
Income taxes			3,307				2,815				17.5				6,324				5,668				11.6
Net Income			7,264				6,563				10.7				14,433				13,164				9.6
Tax equivalent adjustment (1)			460				479				(4.0	)			935				943				(0.8	)
At Period End
Assets			2,409,599				2,196,510				9.7
Earning assets			2,200,517				1,998,580				10.1
Loans			1,861,403				1,705,716				9.1
Allowance for loan losses			25,948				25,384				2.2
Deposits			1,920,270				1,763,390				8.9
Stockholders’ equity			286,616				276,028				3.8
Average Balances
Assets			2,391,064				2,212,603				8.1				2,352,634				2,196,281				7.1
Earning assets			2,162,574				1,991,830				8.6				2,125,573				1,975,146				7.6
Loans			1,828,984				1,673,750				9.3				1,812,592				1,660,404				9.2
Deposits and interest-bearing liabilities			2,079,442				1,909,372				8.9				2,042,429				1,890,622				8.0
Deposits			1,903,139				1,780,912				6.9				1,869,242				1,770,647				5.6
Stockholders’ equity			282,573				274,239				3.0				280,812				277,078				1.3
Stockholders’ equity / assets			11.82	%			12.39	%			(4.7	)			11.94	%			12.62	%			(5.4	)
Per Common Share Data
Net Income
Basic		$	0.81			$	0.71				14.1			$	1.61			$	1.42				13.4
Diluted			0.80				0.70				14.3				1.59				1.39				14.4
Dividends			0.22				0.20				10.0				0.44				0.375				17.3
Market Value:
High		$	41.21			$	38.21				7.9			$	41.21			$	38.21				7.9
Low			37.53				32.42				15.8				34.80				29.05				19.8
Close			38.85				37.53				3.5				38.85				37.53				3.5
Common Book Value			31.95				29.76				7.4				31.95				29.76				7.4
Tangible Common Book Value			24.89				22.91				8.6				24.89				22.91				8.6
Shares outstanding, end of period (000)			8,971				9,275				(3.3	)			8,971				9,275				(3.3	)
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.71	%			3.81	%			(2.7	)			3.75	%			3.84	%			(2.4	)
Return on average assets			1.22	%			1.19	%			2.7				1.23	%			1.21	%			2.1
Return on average equity			10.34	%			9.60	%			7.7				10.34	%			9.58	%			7.9
Efficiency ratio (2)			61.51	%			63.02	%			(2.4	)			61.42	%			62.87	%			(2.3	)
Effective tax rate			31.28	%			30.02	%			4.2				30.47	%			30.10	%			1.2
Dividend payout ratio (basic)			27.16	%			28.17	%			(3.6	)			27.33	%			26.41	%			3.5

 

(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								Six Months Ended
		June 30,								June 30,
(dollars in thousands)		2016				2015				2016				2015
Gain from sale of mortgage loans		$	1,426			$	1,246			$	2,420			$	2,531
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue			876				852				1,753				1,727
Amortization of mortgage servicing rights			(434	)			(446	)			(745	)			(857	)
Mortgage servicing rights valuation adjustments			(104	)			141				(125	)			167
			338				547				883				1,037
Total revenue from sale and servicing of mortgage loans		$	1,764			$	1,793			$	3,303			$	3,568

 

 

Yield Analysis

First Defiance Financial Corp.

 

		Three Months Ended June 30,
		(dollars in thousands)
		2016												2015
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate(2)				Balance				Interest(1)				Rate(2)
Interest-earning assets:
Loans receivable		$	1,828,984			$	19,716				4.34	%		$	1,673,750			$	18,186				4.36	%
Securities			224,494				1,953				3.62	%			245,539				2,153				3.63	%
Interest Bearing Deposits			95,296				134				0.57	%			58,739				41				0.28	%
FHLB stock			13,800				137				3.99	%			13,802				136				3.95	%
Total interest-earning assets			2,162,574				21,940				4.10	%			1,991,830				20,516				4.15	%
Non-interest-earning assets			228,490												220,773
Total assets		$	2,391,064											$	2,212,603
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,463,086			$	1,545				0.42	%		$	1,397,966			$	1,312				0.38	%
FHLB advances and other			84,506				321				1.53	%			39,578				173				1.75	%
Subordinated debentures			36,141				182				2.03	%			36,128				150				1.67	%
Notes payable			55,656				36				0.26	%			52,754				37				0.28	%
Total interest-bearing liabilities			1,639,389				2,084				0.51	%			1,526,426				1,672				0.44	%
Non-interest bearing deposits			440,053				-				-				382,946				-				-
Total including non-interest-bearing demand deposits			2,079,442				2,084				0.40	%			1,909,372				1,672				0.35	%
Other non-interest-bearing liabilities			29,049												28,992
Total liabilities			2,108,491												1,938,364
Stockholders' equity			282,573												274,239
Total liabilities and stockholders' equity		$	2,391,064											$	2,212,603
Net interest income; interest rate spread						$	19,856				3.59	%						$	18,844				3.71	%
Net interest margin (3)											3.71	%											3.81	%
Average interest-earning assets  to average interest bearing liabilities											132	%											130	%

 

		Six Months Ended June 30,
		2016												2015
		Average								Yield				Average								Yield
		Balance				Interest(1)				Rate				Balance				Interest(1)				Rate
Interest-earning assets:
Loans receivable		$	1,812,592			$	39,079				4.34	%		$	1,660,404			$	36,118				4.39	%
Securities			229,154				4,007				3.64	%			243,281				4,264				3.65	%
Interest Bearing Deposits			70,026				183				0.53	%			57,659				80				0.28	%
FHLB stock			13,801				276				4.02	%			13,802				275				4.02	%
Total interest-earning assets			2,125,573				43,545				4.13	%			1,975,146				40,737				4.18	%
Non-interest-earning assets			227,061												221,135
Total assets		$	2,352,634											$	2,196,281
Deposits and Interest-bearing liabilities:
Interest bearing deposits		$	1,441,783			$	2,978				0.42	%		$	1,396,114			$	2,584				0.37	%
FHLB advances and other			81,598				618				1.52	%			30,534				283				1.87	%
Subordinated debentures			36,140				357				2.00	%			36,129				297				1.66	%
Notes payable			55,449				73				0.27	%			53,312				75				0.28	%
Total interest-bearing liabilities			1,614,970				4,026				0.50	%			1,516,089				3,239				0.43	%
Non-interest bearing deposits			427,459				-				-				374,533				-				-
Total including non-interest-bearing demand deposits			2,042,429				4,026				0.40	%			1,890,622				3,239				0.35	%
Other non-interest-bearing liabilities			29,393												28,581
Total liabilities			2,071,822												1,919,203
Stockholders' equity			280,812												277,078
Total liabilities and stockholders' equity		$	2,352,634											$	2,196,281
Net interest income; interest rate spread						$	39,519				3.63	%						$	37,498				3.75	%
Net interest margin (3)											3.75	%											3.84	%
Average interest-earning assets  to average interest bearing liabilities											132	%											130	%

 

(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)		2nd Qtr 2016				1st Qtr 2016				4th Qtr 2015				3rd Qtr 2015				2nd Qtr 2015
Summary of Operations
Tax-equivalent interest income (1)		$	21,940			$	21,605			$	21,256			$	20,748			$	20,516
Interest expense			2,084				1,942				1,809				1,733				1,672
Tax-equivalent net interest income (1)			19,856				19,663				19,447				19,015				18,844
Provision for loan losses			53				364				43				(27	)			-
Tax-equivalent NII after provision for loan losses (1)			19,803				19,299				19,404				19,042				18,844
Investment securities gains, net of impairment			227				131				22				-				-
Non-interest income (excluding securities gains/losses)			8,348				8,505				7,708				7,982				7,809
Non-interest expense			17,347				17,274				17,347				16,848				16,796
Income taxes			3,307				3,017				2,744				2,998				2,815
Net income			7,264				7,169				6,563				6,696				6,563
Tax equivalent adjustment (1)			460				475				480				482				479
At Period End
Total assets		$	2,409,599			$	2,358,931			$	2,297,676			$	2,228,281			$	2,196,510
Earning assets			2,200,517				2,158,177				2,099,219				2,030,218				1,998,580
Loans			1,861,403				1,824,986				1,802,217				1,733,538				1,705,716
Allowance for loan losses			25,948				25,668				25,382				25,209				25,384
Deposits			1,920,270				1,871,157				1,836,137				1,793,053				1,763,390
Stockholders’ equity			286,616				280,418				280,197				278,556				276,028
Stockholders’ equity / assets			11.89	%			11.89	%			12.19	%			12.50	%			12.57	%
Goodwill			61,798				61,798				61,798				61,798				61,525
Average Balances
Total assets		$	2,391,064			$	2,314,203			$	2,276,060			$	2,222,843			$	2,212,603
Earning assets			2,162,574				2,088,582				2,051,331				2,000,284				1,991,830
Loans			1,828,984				1,796,200				1,732,472				1,696,370				1,673,750
Deposits and interest-bearing liabilities			2,079,442				2,005,395				1,967,199				1,918,587				1,909,372
Deposits			1,903,139				1,835,345				1,823,396				1,786,814				1,780,912
Stockholders’ equity			282,573				279,051				279,192				277,235				274,239
Stockholders’ equity / assets			11.82	%			12.06	%			12.27	%			12.47	%			12.39	%
Per Common Share Data
Net Income:
Basic		$	0.81			$	0.80			$	0.72			$	0.72			$	0.71
Diluted			0.80				0.79				0.71				0.72				0.70
Dividends			0.22				0.22				0.200				0.200				0.200
Market Value:
High		$	41.21			$	40.98			$	42.46			$	39.95			$	38.21
Low			37.53				34.80				35.01				35.03				32.42
Close			38.85				38.41				37.78				36.56				37.53
Common Book Value			31.95				31.29				30.78				30.37				29.76
Shares outstanding, end of period (in thousands)			8,971				8,961				9,102				9,172				9,275
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)			3.71	%			3.80	%			3.77	%			3.78	%			3.81	%
Return on average assets			1.22	%			1.25	%			1.14	%			1.20	%			1.19	%
Return on average equity			10.34	%			10.33	%			9.33	%			9.58	%			9.60	%
Efficiency ratio (2)			61.51	%			61.32	%			63.88	%			62.41	%			63.02	%
Effective tax rate			31.28	%			29.62	%			29.48	%			30.93	%			30.02	%
Common dividend payout ratio (basic)			27.16	%			27.50	%			27.78	%			27.78	%			28.17	%

 

(1)

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

(2)

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

 

 

Selected Quarterly Information

First Defiance Financial Corp.

 

(dollars in thousands, except per share data)		2nd Qtr 2016				1st Qtr 2016				4th Qtr 2015				3rd Qtr 2015				2nd Qtr 2015
Loan Portfolio Composition
One to four family residential real estate		$	206,861			$	208,818			$	205,330			$	205,370			$	205,044
Construction			161,282				145,635				163,877				129,230				140,114
Commercial real estate			1,001,315				989,468				948,428				922,207				885,125
Commercial			428,599				412,911				419,349				402,681				401,247
Consumer finance			16,690				15,679				16,281				15,774				14,911
Home equity and improvement			116,685				116,856				116,962				113,781				109,694
Total loans			1,931,432				1,889,367				1,870,227				1,789,043				1,756,135
Less:
Undisbursed loan funds			68,850				63,267				66,902				54,484				49,477
Deferred loan origination fees			1,179				1,114				1,108				1,021				942
Allowance for loan loss			25,948				25,668				25,382				25,209				25,384
Net Loans		$	1,835,455			$	1,799,318			$	1,776,835			$	1,708,329			$	1,680,332
Allowance for loan loss activity
Beginning allowance		$	25,668			$	25,382			$	25,209			$	25,384			$	25,302
Provision for loan losses			53				364				43				(27	)			-
Credit loss charge-offs:
One to four family residential real estate			37				55				8				185				11
Commercial real estate			0				13				103				64				146
Commercial			18				336				0				43				23
Consumer finance			18				0				32				5				13
Home equity and improvement			66				30				10				110				187
Total charge-offs			139				434				153				407				380
Total recoveries			366				356				282				259				462
Net charge-offs (recoveries)			(227	)			78				(129	)			148				(82	)
Ending allowance		$	25,948			$	25,668			$	25,382			$	25,209			$	25,384
Credit Quality
Total non-performing loans (1)		$	16,423			$	17,707			$	16,261			$	16,612			$	16,737
Real estate owned (REO)			1,079				1,111				1,321				4,936				5,371
Total non-performing assets (2)		$	17,502			$	18,818			$	17,582			$	21,548			$	22,108
Net charge-offs (recoveries)			(227	)			78				(129	)			148				(82	)
Restructured loans, accruing (3)			9,648				11,284				11,178				13,786				22,234
Allowance for loan losses / loans			1.39	%			1.41	%			1.41	%			1.45	%			1.49	%
Allowance for loan losses / non-performing assets			148.26	%			136.40	%			144.36	%			116.99	%			114.82	%
Allowance for loan losses / non-performing loans			158.00	%			144.96	%			156.09	%			151.75	%			151.66	%
Non-performing assets / loans plus REO			0.94	%			1.03	%			0.97	%			1.24	%			1.29	%
Non-performing assets / total assets			0.73	%			0.80	%			0.77	%			0.97	%			1.01	%
Net charge-offs / average loans (annualized)			-0.05	%			0.02	%			-0.03	%			0.03	%			-0.02	%
Deposit Balances
Non-interest-bearing demand deposits		$	442,811			$	426,053			$	420,691			$	392,103			$	378,970
Interest-bearing demand deposits and money market			805,550				783,016				767,201				745,233				722,813
Savings deposits			240,316				233,546				219,655				216,613				218,055
Retail time deposits less than $100,000			277,904				279,376				278,707				282,331				284,471
Retail time deposits greater than $100,000			153,689				149,166				149,883				156,773				159,081
Total deposits		$	1,920,270			$	1,871,157			$	1,836,137			$	1,793,053			$	1,763,390

 

(1)

Non-performing loans consist of non-accrual loans.

(2)

Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof.

(3)

Accruing restructured loans are loans with known credit problems that are not contractually past due and therefore are not included in non-performing loans.

 

 

 

Loan Delinquency Information

First Defiance Financial Corp.

 

(dollars in thousands)		Total Balance				Current				30 to 89 days past due				Non Accrual Loans
June 30, 2016
One to four family residential real estate		$	206,861			$	203,534			$	619			$	2,708
Construction			161,282				161,282				-				-
Commercial real estate			1,001,315				988,342				2,174				10,799
Commercial			428,599				424,107				2,269				2,223
Consumer finance			16,690				16,629				45				16
Home equity and improvement			116,685				115,376				632				677
Total loans		$	1,931,432			$	1,909,270			$	5,739			$	16,423
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
June 30, 2015
One to four family residential real estate		$	205,044			$	201,629			$	473			$	2,942
Construction			140,114				140,114				-				-
Commercial real estate			885,125				872,654				2,685				9,786
Commercial			401,247				397,653				148				3,446
Consumer finance			14,911				14,885				16				10
Home equity and improvement			109,694				108,238				903				553
Total loans		$	1,756,135			$	1,735,173			$	4,225			$	16,737