UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities

Exchange Act of 1934 (Amendment No. )

Filed by the RegistrantS x

Filed by a Party other than the Registrant£ ¨

Check the appropriate box:

FIRST DEFIANCE FINANCIAL CORP.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

to be held on

April 24, 201222, 2014

and

PROXY STATEMENT

601 Clinton Street

Defiance, Ohio 43512

(419) 782-5015

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 24, 201222, 2014

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (“Annual Meeting”) of First Defiance Financial Corp. (“First Defiance”) will be held, at the Operations Center of its subsidiary First Federal Bank of the Midwest, located at 25600 Elliott Road, Defiance, Ohio 43512, on Tuesday, April 24, 201222, 2014 at 2:00 p.m., Eastern Time,Time. This year’s Annual Meeting will be a virtual meeting of shareholders. You will be able to participate in the meeting, vote and submit questions during the meeting via live webcast by visitinghttp://www.virtualshareholdermeeting.com/fdef. A secure control number that will allow you to attend the meeting electronically can be found on the enclosed proxy card. The meeting is being held for the following purposes, all of which are more completely set forth in the accompanying Proxy Statement:

The Board of Directors has fixed March 2, 20123, 2014 as the voting record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting orand at any adjournment thereof. Only those shareholders of record as of the close of business on that date will be entitled to vote at the Annual Meeting or at any such adjournment.

	BY ORDER OF THE BOARD OF DIRECTORS
	William J. SmallDonald P. Hileman
	Chairman, President and Chief Executive Officer

March 23, 201217, 2014

Defiance, Ohio

PROXY STATEMENT

First Defiance Financial Corp.

601 Clinton Street

Defiance, Ohio 43512

20122014 ANNUAL MEETING OF SHAREHOLDERS

April 24, 201222, 2014

GENERAL

This Proxy Statementproxy statement is being furnished to holders of common stock, $0.01 par value per share (“Common Stock”), of First Defiance Financial Corp. (“First Defiance” or the “Company”“Company,” “we,” “us,” “our”). Proxies are being solicited on behalf of theOur Board of Directors of First Defiance(the “Board”) is soliciting proxies to be used at theour 2014 Annual Meeting of Shareholders (“Annual(the “Annual Meeting”) to be held at the Operations Center of First Federal Bank of the Midwest (“First Federal”) located at 25600 Elliott Road, Defiance, Ohio 43512, on Tuesday, April 24, 201222, 2014 at 2:00 p.m., Eastern Time, and at any adjournment thereof, for the purposes set forth in the Notice of Annual Meeting of Shareholders. The Annual Meeting will be an entirely virtual meeting. That means you can attend the 2014 Annual Meeting online, vote your shares electronically and submit questions during the meeting, by visitingwww.virtualshareholdermeeting.com/fdef. Be sure to have your 12-Digit Control Number to enter the meeting. This Proxy Statementproxy statement is first being mailed to our shareholders on or about March 26, 2012.21, 2014.

First Defiance’sOur policy is to send a single annual report and proxy statement to multiple shareholders of record that share the same address, unless First Defiance receiveswe receive instructions to the contrary. However, each shareholder of record receives a separate proxy card. This practice, known as “householding,” is designed to reduce our printing and postage costs. If you wish to receive a separate copy of this year’s annual report or proxy statement, you may request it by writing to First Defianceus at the above address. If you wish to discontinue householding entirely, you may contact Registrar and Transfer Company by telephone at 1-800-368-5948, by e-mail at info@rtco.com, or by written instructions sent to Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016-3572. If you receive multiple copies of the annual report and proxy statement, you may request householding by contacting Registrar and Transfer as noted above. If your shares are held in street name through a bank, broker or other holder of record, you may request householding by contacting that bank, broker or other holder of record.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON APRIL 24, 201222, 2014

The Proxy Statement for the 2014 Annual Meeting of Shareholders and 2011the 2013 Annual Report to shareholders,Shareholders, which includes the Form 10-K for the year ended December 31, 2011,2013, are both available at www.cfpproxy.com/3874.www.proxyvote.com using your 12-Digit Control Number.

ATTENDING THE ANNUAL MEETING

We will be hosting the Annual Meeting live via the Internet. A summary of the information you need to attend the Annual Meeting online is provided below:

PROXIES

TheYour proxy, solicited hereby, if properly submitted to First Defiance and not revoked prior to its use, will be voted in accordance with the instructions contained therein.you give.If no contraryProperly submitted proxies that do not contain voting instructions and that are given and the proxy does not represent a broker non-vote, each proxy received“broker non-votes” will be voted (1) FOR the director nominees for director described herein, (2) FOR the approval of First Defiance’sour executive compensation, (3) FOR the ratification of the appointment of Crowe Horwath LLP as theour independent registered public accounting firm for 2012,2014, and (4) in accordance with the best judgment of the persons appointed as proxies upon the transaction of such other business as may properly come before the meeting. Any shareholder giving aYou may revoke your proxy has the power to revoke it at any time before it is exercised by (i) filing written notice of revocation with theour Secretary, of First Defiance

(John W. Boesling, Secretary, First Defiance Financial Corp.,Danielle R. Figley, at 601 Clinton Street, Defiance, Ohio 43512);43512 that is received prior to voting at the Annual Meeting; (ii) submitting a valid proxy bearing a later date; or (iii) appearingdate that is received prior to voting at the Annual Meeting; or (iii) attending the Annual Meeting online and giving notice of revocation to the Secretary. Attending the Annual Meeting will not, by itself, revoke a previously given proxy. Proxies solicited hereby may be exercised only at the Annual Meeting and any adjournment thereof and will not be used for any other meeting.

VOTING RIGHTS

Only our shareholders of record at the close of business on March 2, 2012 (“Voting3, 2014 (the “Voting Record Date”) are entitled to notice of, and to vote at, the Annual Meeting. On the Voting Record Date, there were9,726,454 9,646,049 shares of our Common Stock issued and outstanding. First Defiance hadWe have no other class of equity securities outstanding that are entitled to vote at the Annual Meeting.Meeting.

The presence, either in person or by proxy, of at least a majority of theour outstanding shares of Common Stock entitled to vote is necessary to constitute a quorum at the Annual Meeting. Abstentions and broker non-votes are counted in determining the presence of a quorum.

REQUIRED VOTE

ShareholdersYou are entitled to cast one vote for each share owned. Directors will be elected by a plurality of the votes cast. First Defiance’sOur Articles of Incorporation do not permit shareholders to cumulate votes in the election of directors. Abstentions and broker non-votes will not affect the plurality vote required for the election of directors. The proposalproposals to approve the Company’sour executive compensation and to ratify the appointment of Crowe Horwath require that the number of votes cast in favor of each proposal exceed the number of votes cast against it. Abstentions and broker non-votes will not be counted as votes cast and, therefore, will not affect either of these proposals.

The proposal to approve First Defiance’sour executive compensation is advisory, so it will not be binding upon the Board of Directors.Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. The proposal to ratify the selection of auditors is not binding upon the Board of Directors.Board. However, if the selection is not ratified by the shareholders, the Audit Committee may re-consider its selection of Crowe Horwath as theour independent registered public accounting firm for the fiscal year ending December 31, 2012.2014.

The proposal for the election of directors and the non-binding advisory vote on executive compensation are not “discretionary” items, soitems. If your shares are held in “street name,”you must provide instructions to your brokerage firm in order to cast a vote on these proposals. The ratification of the selection of Crowe Horwath is considered a “discretionary” item, so your brokerage firm may vote in its discretion on your behalf if you do not furnish voting instructions.

PARTICIPATION IN CAPITAL PURCHASE PROGRAM
ENACTED AS PART OF TROUBLED ASSETS RELIEF PROGRAM

On December 5, 2008, the Company issued to the United States Department of the Treasury (the “U.S. Treasury”) $37.0 million of First Defiance non-voting preferred stock and a warrant to purchase 550,595 shares of Common Stock at an exercise price of $10.08 per share, subject to certain anti-dilution and other adjustments, in exchange for $37.0 million in cash. This issuance was made under the U.S. Treasury’s Capital Purchase Program (the “CPP”), which was enacted as part of the Troubled Asset Relief Program (“TARP”). The warrant has a ten-year term.

By participating in the CPP, the Company agreed to adopt the U.S. Treasury’s standards for executive compensation and corporate governance for the period during which the U.S. Treasury owns any First Defiance securities. These standards generally apply to our executive officers and are set forth

in the American Recovery and Reinvestment Act of 2009 (“ARRA”) and an interim final rule promulgated by the U.S. Treasury under 31 CFR Part 30 on June 15, 2009 and amended on December 7, 2009 (collectively, the “Interim Final Rule”). The executive compensation and corporate governance standards under ARRA and the Interim Final Rule remain in effect during the period in which any obligation arising under the CPP is outstanding, excluding any period during which the U.S. Treasury holds only the warrant to purchase Common Stock (the “CPP Covered Period”).

PROPOSAL 1

Election of Directors

Composition of the Board

In 2011, the full2013, our Board consisted of 11 directors. The Board has determined that each of John L. Bookmyer, Stephen L. Boomer, Peter A. Diehl, Jean A. Hubbard,Barbara A. Mitzel, Thomas A. Voigt, Douglas A. Burgei, Dwain I. Metzger, and Samuel S. Strausbaugh is “independent” under the rules of The NASDAQ Stock Market LLC (“NASDAQ”).

The Board is divided into three classes, and each class serves a three-year term. The terms of each class expire at successive annual meetings so that theour shareholders elect one class of directors at each annual meeting.

The current composition of the Board is:

Because Mr. Metzger has reached the age limitation forWe will elect three directors as set forth in the Board’s Bylaws, he is no longer eligible for re-election to the Board. The Board intends to reduce the size of the Board to eliminate the vacancy created upon the expiration of Mr. Metzger’s term. The Board intends to take such action at the Board meeting immediately preceding the Annual Meeting. The election of two directors will take place at the Annual Meeting. Mr. BurgeiMs. Hubbard, Ms. Mitzel and Mr. StrausbaughRohrs are standing for re-election. If elected, each director nominee will serve on the Board until theour annual meeting of shareholders in 2015,2017, and until their successors are duly elected and qualified in accordance with the Company’s Code of Regulations.qualified. If eitherany of the twothree nominees should become unable or unwilling to stand for election at the Annual Meeting, the persons named on the proxy card as proxies may vote for other person(s) selected by the Board of the named proxies. Management hasBoard. We have no reason to believe that eitherany of the nominees for election named below will be unable or unwilling to serve.

YourThomas A. Voight will not stand for re-election to the Board Recommends That You
Vote FOR The Two Nominees Listed Below.
this year. As a result, after the Annual Meeting we will have a vacancy in the class of directors whose terms will expire at the 2017 annual meeting. We intend to hold this vacancy open while we consider whether another director should be added to the Board.

Nominees Forfor Election as Directors With Terms Expiring at this Annual Meeting:

Continuing Directors With Terms Expiring at the 2013 Annual Meeting:

Continuing Directors With Terms Expiring at the 2014 Annual Meeting:

Continuing Directors With Terms Expiring at our 2015 Annual Meeting:

Continuing Directors With Terms Expiring at our 2016 Annual Meeting:

Board Leadership Structure

Since his appointment as President and CEO in 1999, William J. Small has also served as Chairman of the Board of Directors. The Board of Directors believes that Mr. Small is best situated to serve as Chairman of the Board based upon his significant leadership position with First Defiance and his in-depth familiarity with the Company’s business and industry. In addition, the Board of Directors believes thatUpon Mr. Small’s combined roles as Chairman and CEOretirement in 2013, he retained the position him to effectively identify First Defiance’s strategic priorities and lead Board discussions on the execution of Company strategy. While each of First Defiance’s independent directors brings unique experience, oversight and expertise from outside the Company and its industry, Mr. Small’s company-specific experience and expertise allow him to effectively direct Board discussions and focus Board decision-making on those items most important to the Company’s overall success. The Board of Directors believes that the combined role of Chairman and CEO helps promote First Defiance’s overall strategic developmentDonald P. Hileman became our President and facilitatesCEO. This marked the efficient flow of information between managementfirst time in over a decade that these positions had been split. The Board decided it was time to divide these roles because, by doing so, they could continue to benefit from Mr. Small’s experience in a leadership role, and the Board.his indepth familiarity with our hiring and operations.

While theThe Board of Directors believes that having a combined Chairman and CEO is essential to First Defiance’s overall strategic development, the Board is also aware that one of its responsibilities is to oversee Companyour management and make performance, risk and compensation related decisions regarding management. In order to appropriately balance the Board’s focus on strategic development

with its management oversight responsibilities, the Board of Directors created the position of Lead Independent Director, with Stephen L. Boomer currently serving in that role. As Lead Independent Director, Mr. Boomer is a permanent member of the Board’s Executive Committee and presides over executive sessions of the Board, which are attended only by non-management directors. In addition, Mr. Boomer is an active liaison between management and First Defiance’sour non-management directors, maintaining frequent contact both with Mr. Small to advise him on the progress of Board committee meetings, and with individual non-management directors concerning recent developments affecting the Company.us. Through the role of an active, engaged Lead Independent Director, Board of Directors believes that its leadership structure is appropriately balanced between promoting First Defiance’sour strategic development with the Board’s management oversight function. The Board of Directors also believes that its leadership structure has created an environment of open, efficient communication between the Board and management, enabling the Board to maintain an active, informed role in risk management by being able to monitor and manage those matters that may present significant risks to First Defiance.

us. The Board intends to maintain the Lead Director position until such time as Mr. Small would qualify as an independent director or an Independent Chairman as appointed.

Board Committees

The Board of Directors has sixfive standing committees: the Audit Committee, Corporate Governance Committee, Compensation Committee, Strategic Planning Committee, Executive Committee and Succession PlanningRisk Committee. MembersThe current members of theour individual standing committees are named below:

# - Chairperson

** - Lead Independent Director

*** -Denotes Rotating Service

TheAudit Committee is responsible for: (i) the appointment of First Defiance’sour independent registered public accounting firm; (ii) review of the external audit plan and the results of the auditing engagement; (iii) review of the internal audit plan and results of the internal audits; (iv) review of reports issued by First Federal’sour Compliance Officer; (v) review of the effectiveness of First Defiance’sour system of internal control, including review of the process used by management to evaluate the effectiveness of the system of internal control; and (vi) oversight of theour accounting and financial reporting practices of First Defiance.practices. The Audit Committee has adopted a written charter setting forth these responsibilities, a copy of which is posted on the Company’sour website athttp://www.fdef.com.www.fdef.com under this link “Governance Documents.”The Board has determined that John L. Bookmyer and Samuel S. Strausbaugh each have the attributes listed in the definition of “audit committee financial expert” set forth in Item 407(d)(5)(ii) of Regulation S-K and in the NASDAQ listing requirements. All of the Audit Committee members are considered “independent” for purposes of the NASDAQ listing requirements, and meet the NASDAQ standards for financial sophistication. The Audit Committee met fiveseven times in 2011.2013.

TheCorporate Governance Committee was established by the Board of Directors to ensure that the Board is appropriately constituted and conducts its affairs in a manner that will best serve the Company’s interests and those of First Defiance and itsour shareholders. Specific duties of the Committee include administering First Defiance’sour conflict of interest policy/policy/code of ethics,, monitoring the Board’s continuing education and self-assessment process, nominating directors to the Board, and conducting an annual assessment of the Board as a whole, including an assessment of Board composition and committee assignments. The Corporate Governance Committee has adopted a written charter setting forth its responsibilities, a copy of which is postedon our website athttp://www.fdef.com under the Company’s website at http://www.fdef.com.link “Governance Documents.” The Corporate Governance Committee met two times in 2011.2013.

The Board does not have a separate nominating committee as those functions are performed by the Corporate Governance Committee and the Board as a whole. The Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements, having business experience, and exhibiting high moral character. While the Committee does not have a formal diversity policy in place, the Committee does seek to promote a diverse set of viewpoints and business experience in the Board’s membership. The Committee retains the right to modify these minimum qualifications from time to time as circumstances dictate. The Committee has a general process for choosing nominees, which process considers both incumbent directors and new candidates. In evaluating an incumbent director whose term of office is set to expire, the Committee reviews such director’s overall service to First Defianceus during his or her term, including attendance at meetings, participation and quality of performance. If the Committee chooses to evaluate new director candidates, the Committee uses its network of contacts to compile a list of potential candidates. Then, the Committee determines whether such candidates are independent, which determination is based upon applicable securities laws. Finally, the Committee meets to discuss and consider all candidates’ qualifications and then chooses the candidates. The Corporate Governance Committee considers the following criteria in proposing director nominees to the full Board: (1) independence; (2) high personal and professional ethics and integrity; (3) ability to devote sufficient time to fulfilling duties as a director; (4) impact on diversity of the Board, including skills and other factors relevant to First Defiance’sour business; and (5) overall experience in business, education, and other factors relevant to First Defiance’sour business.

Shareholders of First DefianceOur shareholders may also make nominations to the Corporate Governance Committee, provided that notice of such nomination is given in writing to theour Secretary of First Defiance not less than 60 days prior to the anniversary date of the immediately preceding annual meeting of shareholders. The notice must set forth the name, age, business address and residence address (if available) of the nominee and the number of shares of Common Stock which are beneficially owned by the nominee. Also, the shareholder making the nomination must promptly provide any other information reasonably requested by the Corporate Governance Committee. The Committee does not alter the manner in which it evaluates candidates, including the minimum criteria set forth above, when evaluating a candidate who was recommended by a shareholder. No director nominations were received from shareholders for the 20122014 election of directors.

As of January 1, 2013, the Strategic Planning Committee was rolled into the Corporate Governance Committee along with its specific duties and responsibilities.

TheCompensation Committee is responsible for overseeing First Defiance’sour compensation programs, including base salaries, long-term incentive compensation, equity-based compensation, and perquisites and benefit plans. The Committee also administers the process for evaluation of the Chairman and Chief Executive Officer and recommends to the Board the compensation for directors (including committee member and committee chair’s fees, equity-based awards and other similar items as appropriate). Further description of the Committee’s responsibilities is set forth under the “Compensation Discussion and Analysis” below. The Compensation Committee has adopted a written charter setting forth its responsibilities, a copy of which is posted athttp://www.fdef.com.www.fdef.com under the link “Governance Documents.” The Committee also makes recommendations to the full Board regarding director compensation. All of the Compensation Committee members are considered “independent” for purposes of NASDAQ listing requirements. The Compensation Committee met fivefour times in 2011.2013.

The executive compensation standards under ARRA and the Interim Final Rule require that, during the CPP Covered Period, First Defiance establish and maintain a compensation committee consisting solely of independent directors for the purpose of reviewing First Defiance’s employee compensation plans. The Compensation Committee is a “compensation committee” for purposes of ARRA and the Interim Final Rule. ARRA and the Interim Final Rule also require that the Compensation Committee meet at least every six months and take the following actions:

·         Discuss, evaluate and review all SEO Compensation Plans (as defined in the Interim Final Rule) with First Defiance’s senior risk officer to ensure that the SEO Compensation Plans do not include incentives for our Senior Executive Officers (as defined in the Interim Final Rule) to take unnecessary and excessive risks that could threaten First Defiance’s value.

·         Discuss, evaluate and review all Employee Compensation Plans (as defined in the Interim Final Rule) with First Defiance’s senior risk officer in light of the risks (including the short-term and long-term risks) posed to First Defiance by such Employee Compensation Plans and how to limit such risks.

·         Discuss, evaluate and review all Employee Compensation Plans and identify and eliminate features in the Employee Compensation Plans that could encourage the manipulation of reported earnings to enhance the compensation of any employee.

The Compensation Committee is required to both disclose the results, and certify completion, of the reviews described above in the Compensation Committee Report. The disclosure and certifications in the form required by the Interim Final Rule issued by the U.S. Treasury are included in the section captioned “Compensation Committee Report”.

TheExecutive Committee generally has the power and authority to act on behalf of the Board of Directors between scheduled Board meetings unless specific Board action is required or unless otherwise restricted by First Defiance’sour Articles of Incorporation or Code of Regulations, or its Board of Directors.the Board. As Chairman of the Board, Mr. Small serves as Chairman of the Executive Committee and Messrs. Rohrs and Boomer serve as permanent members. The remaining directors, with the exception of Ms. Mitzel, serve on the Committee on a rotating basis during the year. The Executive Committee did not meet during 2011.2013.

TheSuccession PlanningRisk Committee directswas established by the Board to assist the Board of Directors in fulfilling its oversight responsibilities with regard to the risk appetite of the Company and the risk management and compliance framework and the governance structure that support it. The Risk Committee has adopted a processwritten charter setting forth these responsibilities, a copy of systematically and deliberately preparing for future changes of leadership in key positions withinwhich is posted on the Company.Company’s website athttp://www.fdef.com under this link “Governance Documents.” The process may identify potential replacements and provide strategies for developing and/or hiring individuals to meet future needs. The Succession PlanningRisk Committee met twiceseven times in 2011.

2013.

Compensation Committee Interlocks and Insider Participation

Mr. Bookmyer, Mr. Boomer, Ms. Hubbard, Mr. Strausbaugh and Mr. Voigt served on the Compensation Committee during 2011.2013. There were no Compensation Committee interlocks or insider (employee) participation during 2011.2013.

Board and Board Committee Meetings

RegularOur Board holds regular meetings of thequarterly. First Federal’s Board of Directors of First Defiance are held quarterly. The Board of Directors of First Federal meets monthly. Special meetings of the Boards are held from time to time as needed. There were four meetings of the Board of Directors of First Defiance and twelve meetings of the Board of Directors of First Federal held during 2011.No director2013. All of our directors attended fewer thanat least 75% of the total

number of meetings of the Board of Directors of First Defiance or First Federal, as applicable, and meetings held by all committees of the Board on which the director served during 2011.2013.

Neither the Board nor the Corporate Governance Committee has implemented a formal policy regarding director attendance at the Annual Meeting. Typically, the Board holds its annual organizational meeting directly following the Annual Meeting, which results in most directors attending the Annual Meeting. In 2011,2013, all eleven11 then incumbent directors attended the Annual Meeting.annual meeting.

Non-management directors met twice in two executive sessionssession in 2011. Mr. Boomer, the Lead Independent Director, presided over those meetings.2013.

Director Compensation

The table below provides information concerning theour director compensation of directors for the fiscal year ended December 31, 2011.2013. Employee directors are not paid for Board service. Each non-employee director received an annual retainer of $21,000 in 20112013 with the exception of Mr. Boomer, the Lead Independent Director, who received a retainer of $24,500.$26,000. Committee chairs receive an additional annual retainer as follows: (1) Audit Committee -- $3,000;– $5,000; (2) Compensation Committee -- $2,000;– $3,000; and (3) Corporate Governance Committee and Strategic Planning Committee -- $1,000.– $2,000. In addition, each non-employee director received $400$750 for each Boardboard meeting attended for either First Defiance or First Federal. Mr. Boomer and Mr. Strausbaugh are also directors of First Insurance Group of the Midwest, Inc., and they receive $400$500 for each First Insurance Boardsuch meeting attended. Non-employee directors also receive compensation for each committee meeting attended as follows: (1) Audit Committee --– $500; (2) Compensation Committee -- $400;– $500; (3) Executive or First Federal Executive Loan Committee meetings --– $200; and (4) other First Defiance and First Federal Board committees -- $300. In 2012 non-employee directors will be paid $500 for each committee meeting with the exception of the Executive and First Federal Executive Loan Committee which will remain at $200.– $500.

DirectorsOur directors may defer their retainer and/or meeting fees payable to them under the First Defiance Deferred Compensation Plan. The return on the amounts deferred is dependent on the investment elections made by the director. The directors’ choices for election include a number of mutual funds and a First Defiance stock account.an account of our Common Stock. Returns under the plan are calculated to mirror these elections. Because these earnings are denominated in First Defiance stockour Common Stock or the mutual fund equivalents, such earnings are not considered to be preferential or above market and are not reported in the table below. Also, directors do not receiveno director received perquisites or personal benefits that havewith an aggregate value that exceedsexceeding $10,000.

20112013 Director Compensation

Communication with Directors

The Board of Directors has adopted a process by which shareholders may communicate with the directors. Any shareholder wishing to do so may write to the Board of Directors at the Company’sour principal business address, 601 Clinton St., Defiance, OHOhio 43512. Any shareholder communication so addressed will be delivered unopened to the director or a member of the group of directors to whom it is addressed, or to the Chairman if addressed to the Board of Directors.Board.

Board’s Role in Strategic Planning

TheOur Board of Directors has the legal responsibility for overseeing theour affairs of the Company and, thus, an obligation to keep informed about the Company’sour business and strategies. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise independently its decision-making authority on matters of importance to the Company.us. Acting as a full Board and through the Board’sits standing committees, (Audit Committee, Corporate Governance Committee, Compensation Committee, Strategic Planning Committee and Executive Committee), the Board is fully involved in the Company’sour strategic planning process.

Each year, typically in September, senior management and the Board hold an extended meeting to focus on corporate strategy. This session involves presentations from management and input from the Boarddirectors regarding the assumptions, priorities and strategies that will form the basis for management’s operating plan and strategy for the coming year. At subsequent Board meetings, the Board continues to review the Company’sour progress against itsthe strategic plan and to exercise oversight and decision-making authority regarding strategic areas of importance and revise the strategic plan as necessary. The role the Board plays is inextricably linked to the development and review of the Company’sour strategic plan. Through these procedures, the Board, consistent with good corporate governance practices, encourages theour long-term success of the Company by exercising sound and independent business judgment on the strategic issues that are important to the Company’sour business.

Board’s Role in Risk Oversight

The Board’s function of overseeing risk is handled primarily by the AuditRisk Committee. The Chief Risk Officer works with management as well as internal and external auditors to determine and evaluate significant risks the Companythat we may be taking and communicates those findings directly to the Committee. The Committee is focused on identifying, quantifying, and minimizing the Company’sour risks. The Committee believes that by involving both management and auditors in this important process, it is best able to perform its function. We also have a standing Officer Risk Management Committee that meets monthly to provide structure and input into our Risk Management Process. The minutes and findings of this Committee are presented to the Risk Committee.

EXECUTIVE OFFICERS

The Board elects executive officers annually following the Annual Meeting of Shareholders to serve until the meeting of the Board following the next annual meeting. The following table sets forth the name of each current executive officer, other than Mr. SmallMessrs. Rohrs and Mr. Rohrs,Hileman, whose information is set forth above, and the principal position and offices he or she holds with First Defiance or First Federal.

COMPENSATION DISCUSSION AND ANALYSIS

The following Compensation Discussion and Analysis describes the material elements of compensation for the First Defianceof our executive officers identified in the Summary Compensation Table (“Named Executive Officers”).

Compensation Philosophy and Objectives

The Board of Directors believes the most effective executive compensation program is one that rewards the achievement of specific annual and long-term and strategic goals whichthat are established in conjunction with strategic planning initiatives and the long-term objective of maximizing shareholder value. Consistent with that philosophy, the Company’sour executive compensation packages include both cash and stock-based compensation that rewardsreward performance as measured against predetermined goals. The Compensation Committee (the “Committee”) evaluates our executive compensation to ensure that it is sufficiently competitive to enable the Companyus to attract and retain qualified employees in key positions. Total compensation commensurate with the median compensation paid to similarly situated executives of peer companies is generally what the Committee considers competitive.

Until 2013, First Defiance’s executive compensation program in 2011 had to comply with the limitations imposed by the CPP,U.S. Treasury’s Capital Purchase Program (“CPP”), commonly called TARP, which affected First Defiance’s executive compensation program by: (i) prohibiting the payment or accrual of any bonus, retention award or incentive compensation to any of First Defiance’s five most highly compensated employees, except in limited circumstances; (ii) prohibiting the payment of golden parachute payments to select highly-paid employees upon a departure from First Defiance or due to a change in control of First Defiance, except for services performed or benefits accrued; (iii) requiring the recovery (“clawback”) of any bonus, retention award or incentive compensation paid to a select group of highly-paid employees if the payment was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (iv) prohibiting any compensation plan that would encourage the manipulation of First Defiance’s reported earnings to enhance the compensation of any of the employees ofby imposing numerous limitations. On June 19, 2012, the Company orrepaid all of its subsidiaries; (v) prohibiting SEO Compensation Plans that encourage Senior Executive Officers to take unnecessary and excessive risks that threatenobligations for the value of First Defiance; (vi) eliminating any “tax gross-ups” to any Senior Executive Officer or a select group of highly-paid employees; (vii) requiring the limitation of any compensation plan that unnecessarily exposes First Defiance to risk; (viii) requiring that First Defiance disclose tofinancial assistance received from the U.S. Treasury under the CPP, and so there were no CPP limitations on our compensation program in 2013. Nontheless, we and our executive officers are still subject to certain remaining restrictions for executive compensation earned or awarded during the Office of Thrift Supervisiontime we were participating in the amount, nature and justification for offering to any of our five most highly-compensated employees any perquisites whose total value exceeds $25,000; (ix) requiring that First Defiance disclose to the U.S. Treasury and the Office of Thrift Supervision whether First Defiance, the Board of Directors or theCPP.

Advisory Vote on Executive Compensation Committee engaged a compensation consultant and the services performed by that compensation consultant and any of its affiliates; (x) requiring that First Defiance disclose to the U.S. Treasury the identity of a select group of highly-paid employees, identified by name and title and ranked in descending order of annual compensation; and (xi) subjecting any bonus, retention award or other compensation paid before February 17, 2009 to a select group of highly-paid employees to retroactive review

We were required by the U.S. TreasuryCPP to determine whether any such payments were inconsistent with the purposes of TARP or otherwise contrary to the public interest.

ARRA and the Interim Final Rule also required that the Board of Directors adopt a company-wide policy regarding “excessive or luxury expenditures,” which was adopted on September 8, 2009, and post this policy on First Defiance’s website. First Defiance must also include in itsour proxy statements for annual meetings of shareholders a non-binding “say on pay” shareholder vote on executive compensation.

This advisory vote on executive compensation is now required by SEC rules. At the 2013 annual meeting, our shareholders approved holding annual votes on our executive compensation. At that same meeting, our shareholders approved our executive compensation with 97.9% of the votes cast.

The resolution to approve First Defiance’s Named Executive Officers and other employees who are subject to the executive compensation limitationsis advisory, so it is not binding upon the Board of Directors. However, the CPP have enteredCompensation Committee took the shareholder recommendation into letter agreements that amend theaccount when reviewing executive compensation and benefit plans in which these individuals participate to comply with the limitations imposed by the CPP.for 2013.

Roles of the Committee and Chief Executive Officer in Compensation Decisions

The Committee makes all compensation decisions for the Chief Executive Officerour CEO and approves all compensation for the other Named Executive Officers utilizing recommendations made by the Chief Executive Officer.our CEO.

20112013 Executive Compensation Components

For the fiscal year ended December 31, 2011,2013, the principal components of compensation for our Named Executive Officers were:

·            Base salary;

·            Short-term cash incentive compensation;

·            Long-term cash and equity incentive compensation;

·            Retirement and other benefits; and

·            Perquisites and other personal benefits.

In 2011,the latter part of 2012, the Compensation Committee engaged Compenstion Consulting Consortium, (“3C”),Pay Governance, an independent human resourcesindependentexecutive compensation consulting firm, to perform an analysis of compensation for the Company’sour CEO and CFO, and the CEO of First Federal BankFederal. In conducting this analysis, Pay Governance independently developed competitive data for base salaries, short-term incentives, total cash compensation (sum of salary and bonus), long-term incentives and total direct compensation (sum of cash compensation and long-term incentives) from the following sources:

Based on an average of the Midwest. 3C comparedresults developed from each of the compensationthree sources for each of these three executive officers tothe pay elements analysis, the analysis indicated:

Based on the recommendation of Pay Governance, the committee determined that it would use the following peer group consistingfor the basis of 15 financial institution holding companies,compensation comparison as well as the CompData Executive compensation survey,group to use in the Towers Watson Financial Service Survey and the William Mercer Executive Compensation Report.long-term incentive plan’s relative performance measures. The peer group companies are publicly-traded banks located in Ohio, Indiana, Michigan, Kentucky, Illinois and Pennslyvania which, at the time they were chosen for inclusion in the peer group, had assets ranging between $1.0 billion to $3.2 billion. The 2011 peer group companies2013 are:

The peer group analysis indicated that the total direct compensation for the CEO, consisting of base salary, short-term incentive pay, and long-term incentive compensation, was below market levels, but the total direct compensation for each of the CFO and President of First Federal was at competitive levels. The CEO's base salary was the principal component that lagged the market.

Base Salary

First Defiance providesWe provide our Named Executive Officers and other employees with a base salary to compensate them for services rendered during the fiscal year. The base salary for each of the Named Executive Officers is generally determined at the beginning of the year.

The 20112013 base salary for Mr. Small, our CEO in 2013, was set at $402,000 effective March 1, 2013. This represented a 10% increase from 2012. Upon the retirement of Mr. Small on December 31, 2013, Mr. Hileman was appointed the Company’s Chief Executive Officer was set at $335,000 effective March 1, 2011. This represents an 9% increase from 2010 which was unchanged from 2009.with a base salary of $365,000.

Base salaries for Named Executive Officers other than Mr. Small and Mr. Hileman are determined based upon recommendations made by the Chief Executive Officer.our CEO. The Chief Executive OfficerCEO generally compares the base salary levels of the other Named Executive Officers with the median levels of public companies of similar asset size and geographic location to First Defiance.us.

For 2011,2013, Mr. Small recommended salary increases for the other Named Executive Officers.Officers ranging from 2% to 5%. After evaluating a number of factors, including the peer group analysis performed by Pay Governance, the Compensation Committee decided to approve some, but not all of Mr. Small’s recommendations for this year.

Performance-Based Incentive Compensation

The Board believes that a significant amount of executive officer compensation should be performance based. In recent years, employeeswe have had an opportunitycreated opportunities for employees to earn short-term and long-term incentive compensation in the form of both cash bonusesand equity awards based on the level of achievement of performance targets that are established each year by the Committee. Stock options have historically beenIn general, the only formCommittee established threshold, target and maximum bonus payout goals. If the threshold performance level is not achieved, the payout percentage for that component of long-term incentive compensation used by the Company. In 2011,bonus calculation is zero. If the Company adoptedperformance level for a new long-term incentive plan to provide for long-term compensation incomponent is between the form of cash awards, with an election to receive shares of Common Stock in lieu of cash.threshold and target or between the target and the maximum performance goal, the payout percentage is prorated.

In March 2013, the Compensation Committee established incentive awards under the 2013 Incentive Plan to permit employees who are selected as participants to earn a specified “target” percentage of their base salary, which is split equally between a short-term award, based on the Company’s 2013 performance, and long-term award, based on the Company’s performance from 2013 to 2015. Both the short-term award and the long-term award can be earned at between 0% and 150% of the specified “target”, depending on the level of attainment of the performance objectives.

2013 Short-Term Incentive Compensation.The 20112013 target short-term incentive compensation component and actual bonus component of the Short Term Incentive Compensation Plan (“STIP”)payout for each of the Named Executive Officers is set forth below.

The 20112013 First Defiance performance targets for the short-term incentive compensation award, the relative weighting of each target and the related payout percentages of the bonus potential are described below:

If the Threshold performance level is not achieved, the payout percentage for that component of the bonus calculation is zero. If the performance level for a component is between the Threshold and Target or between the Target and the Maximum amount, the payout percentage is prorated. In 2011,2013, the Company exceeded the thresholdThreshold level of performance in five of the sixboth categories. The actual EPS level was $1.42, better than the target of $1.34. The$2.19, resulting in a payout for this metric of 42.0% of the target award. The actual efficiency ratio was 30.00% of target bonus. The

actual Non Performing Asset percentage was 2.24%64.81%, better than the threshold of 2.78%. Theresulting in a payout for this metric was 12.69%of 25.06% of the target bonus.award. The third metric that triggered a calculatedaggregate short-term incentive award payout was Classified Assets. The actual level was 6.28% compared with the threshold of 6.81%. The payout for this metric was 15.38%67.06% of the overall target bonus. The fourth metric exceeded was Return on Average Equity. The actual level was 5.89% which exceeded the threshold of 4.79%. The payout for this metric was 10.47% of target bonus. And the fifth metric exceeded was return on Average Assets which was 0.75% which exceeded the target of 0.62%. The payout for this metric was 12.00% of target bonus. The combined payout total was 80.55% of target bonusaward amount. As a result, the Named Executive Officers were entitled to bonusesawards under the short-term incentive plan, which were paid in cash. However, because Mr. Small and Mr. Rohrs were among First Defiance’s five most highly compensated employees, they were prohibited from receiving a cash bonus. The Compensation Committee determined that because they had achieved some of the performance threshold targets established, they should be rewarded for that performance. As a result, the Committee determined that in lieu of cash, they should receive the bonus in the form of restricted stock awards, as permitted under ARRA.

Employees who are prohibited by the Interim Final Rule from receiving a bonus are permitted to receive restricted stock or restricted stock units on the following terms: (i) the restricted stock and/or restricted stock units may not become transferable or payable earlier than in 25% increments as a corresponding percentage of TARP assistance is repaid; (ii) restricted stock and/or restricted stock units must be forfeited if the employee does not continue performing substantial services for at least two years after the grant date (other than due to the employee’s earlier death or disability or the earlier occurrence of a change in control); (iii) the amount or value of restricted stock and/or restricted stock units (determined based on the fair market value of the underlying Common Stock on the grant date) granted in any year may not exceed 1/3 of the employee’s annual compensation for such year.

2013 Long-Term Incentive Compensation.

The Committee established a long-term incentive compensation arrangement that wouldcomponent under the 2013 Incentive Plan to reward senior executives for increasing the value of the Company through sustained future growth and profitability. The arrangement consists of cash awards to be madeAwards are paid in equity issued under a Long Term Incentive Compensation Plan (the “LTIP”). The LTIP, which was finalized in August 2011, authorizes the Committee, in its sole discretion, to determine the recipients of LTIP awards; to determine the specific terms and conditions of each award, consistent with the terms of the LTIP; to determine whether any conditions or objectives related to awards have been met; and to modify or waive any terms and conditions of awards, consistent with the terms of the LTIP. At the time of grant, the Named Executive Officers could elect to receive the awards in shares of Common Stock, pursuant to theour 2010 Equity Incentive Plan,Plan. Under this 2013 long-term incentive compensation arrangement, we entered into an award agreement with each of the executive officers, pursuant to which, each officer has been awarded an amount of restricted stock units equal to 100% the Maximum payout. The maximum number of shares granted under the plan is calculatd by taking the maximum incentive payout dollar value divided by the share price that was based on the 20 day average closing share price as of December 31, 2012. If the officer’s employment terminates for any reason (except for certain circumstances as described in lieuthe 2013 Long-Term Agreement that have special vesting schedules for death, disability, retirement and change in control ) prior to the end of cash awards, andthe applicable performance period, the officer shall forfeit all of the Named Executive Officers electedRSUs subject to receive 60% of the awards in the form of shares of Common Stock to be settled at the time of payment.

In 2011, the Committee madetarget award for that and any subsequent performance period. The 2013-2015 long-term incentive compensation awards to the Named Executive Officers under the LTIP. No LTIP awards were made in 2009 or 2010 because of the uncertainty in the economy.

Under the LTIP, the amount of thetarget award is determined by whether certain terms and conditions are met. Specifically, the 2011 LTIP awards are based upon the following performance criteria: (1) with respect to 33% of each executive’s award, the Company’s return on common equity (“Average ROE”) relative to the return on common equity of a peer group, as determined by the Compensation Committee (the “Peer Group”), during the 24 month period from January 1, 2011 to December 31, 2012 (“Performance Period”); (2) with respect to 33% of each executive’s award, the Company’s diluted earnings per share (“EPS”) relative to the increase in the earnings per share of the Peer Group during the Performance Period; and (3) with respect to the remaining 34% of each executive’s award, the

Company’s increase in revenue (“Revenue Growth”) relative to the increase in the revenue of the Peer Group during the Performance Period.

The target bonus component of the LTIP for each of the Named Executive Officers is set forth below.

The 2013 long-term incentive plan awards have different payout percentages and components than the 2012 long-term incentive plan awards, but utilize the same peer group established by the Compensation Committee. The applicable performance targets relative to Peer Group performancecriteria and weighting for the 2011 LTIP Performance Period, the relative weighting of each target and the related payout percentages2013-2015 performance period are as described below:

(1) ForAchievement of the Named Executive Officers whose awards are restrictedis analyzed and determined by the terms and conditions of the CPP, the percentage of target payoutCompensation Committee. Since Mr. Small retired at the Threshold, Targetend of 2013, the Compensation Committee determined his awards to be 893 shares under the 2012 LTIP, 3,189 shares under the 2013 LTIP, and Maximum performance levels are 33%, 66% and 100%, respectively.$122,390 cash payment under the 2013 STIP.

Retirement Benefits

All employees of First Defiance,our employees, including the Named Executive Officers, are eligible to participate in the First Defiance Financial Corp. 401(k) Employee Savings Plan (the “Savings Plan”) and the First Defiance Employee Stock Ownership Plan (the “ESOP”).

The Savings Plan is a tax-qualified retirement savings plan pursuant to which all employees are able to contribute up to the limit prescribed by the Internal Revenue Service to the Savings Plan on a before-tax basis. First Defiance maintainsWe maintain a safe harbor plan that matches 100% of the first 3% of pay that is contributed to the Savings Plan plus 50% of the salary deferrals between 3% and 5% of compensation. All employee contributions to the Savings Plan are fully vested upon contribution, and First Defiance’sour matching contribution is vested upon completion of a minimum service requirement.

The ESOP is a tax qualified plan under which shares of Common Stock are allocated to participant accounts based on the participant’s compensation relative to compensation of all active participants in the ESOP. The compensation of participants, including the Named Executive Officers, is limited to the Internal Revenue Service mandated maximum of $245,000$250,000 in 20112012 for purposes of calculating the annual allocation of shares. Shares allocated to participant accounts are fully vested when the participant has completed three years of service. Participants in the ESOP hold full voting privileges for shares allocated to their account. Additional shares are allocated to participant accounts in lieu of dividends earned on allocated shares. Shares in the ESOP have been fully allocated, subject to re-allocation in the event of forfeitures. First DefianceWe did not make a contribution to the ESOP in 2011, 2012 or 2010,2013, and contributions in future years are not contemplated at this time.

The Named Executive Officers are entitled to participate in the First Defiance Deferred Compensation Plan, which enables the Named Executive Officers to defer up to 80% of their base salary and up to 100% of bonus payments. The First Defiance Deferred Compensation Plan is discussed in

further detail under the heading “Executive Compensation--—Nonqualified Deferred Compensation”below.

Perquisites and Other Personal Benefits

First Defiance providesWe provide our Named Executive Officers with perquisites and other personal benefits that the Companywe and the Committee believe are reasonable and consistent with itsour overall compensation program to better enable the Companyus to attract and retain employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to Named Executive Officers.

In 2011, the Company2013, we provided each of the Named Executive Officers with the option to receive a $600 monthly automobile allowance. The Company provides MrWe provide Mr. Allen the use of a Company owned vehicle. Each Named Executive Officer also is entitled to receive a social country club membership and, upon relocation, to receive reimbursement for certain reasonable expenses associated with the costs of such relocation. There were no relocations of executive officers in 2011.2013.

In 2010, the Companywe established an Executive Group Life Post-Separation Plan, which provided death benefits equal to two times the executive’s base salary. Participation in the Post Separation planPlan terminated the executivesexecutives’ participation in the First Federal Bank of the Midwest Executive Group Life Plan dated April 28, 2003. The following individuals participate in the plan: Mr. Small, Mr. Rohrs, Mr. Hileman, Mr. Allen, Mr. Rose and Mr. Harris.

The value of these perquisites is included in column (i)(g) of the “Summary Compensation Table.”

The Company hasEmployment Agreements

We have Employment Agreements with certain key employees, including the Named Executive Officers. The employment agreements include provisions for severance payments upon a change of control and are designed to promote stability and continuity of senior management. Information regarding applicable payments under such agreements for the Named Executive Officers is provided under the heading “Executive Compensation --—Potential Payments Upon Termination or Change in Control”below.

Tax and Accounting ImplicationsCOMPENSATION COMMITTEE REPORT

Accounting for Stock-Based Compensation

Beginning on January 1, 2006, the Company began accounting for its stock option plans in accordance with the requirements of FASB Statement No. 123(R)Share-Based Payment.

COMPENSATION COMMITTEE REPORT

The First DefianceDefiance’s Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’sour annual report on Form 10-K.

The Compensation Committee certifies that:Samuel S. Strausbaugh, Chairman

John L. Bookmyer

Stephen L. Boomer

Jean A. Hubbard

Thomas A. Voight

March 17, 2014

(1) It has reviewed with senior risk officers the senior executive officer compensation plans, each as defined in the regulations and guidance established under Section 111 of the Emergency Economic Stabilization Act of 2008 (“EESA”), and has made all reasonable efforts to ensure that these plans do not encourage senior executive officers, as defined in the regulations and guidance established under Section 111 of EESA (“SEOs”), to take unnecessary and excessive risks that threaten the value of First Defiance;

(2) It has reviewed with senior risk officers the employee compensation plans, as defined in the regulations and guidance established under Section 111 of EESA, and has made all reasonable efforts to limit any unnecessary risks these plans pose to First Defiance; and

(3) It has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of First Defiance to enhance the compensation of any employee.

On February 7, 2011, August 11, 2011 and Febuary 9, 2012 the Compensation Committee met with First Defiance’s senior risk officer and discussed, evaluated and reviewed First Defiance’s SEO Compensation Plans and Employee Compensation Plans as required by the regulations and guidance established under Section 111 of EESA.

The Compensation Committee reviewed each SEO Compensation Plan to determine whether the plan contained incentives for Senior Executive Officers or other employees to take unnecessary or excessive risks that threaten the value of First Defiance. The Compensation Committee also reviewed each Employee Compensation Plan using this standard, which is more stringent than required by the regulations and guidance established under Section 111 of EESA. In addition, the Compensation Committee reviewed each Employee Compensation Plan to eliminate any features that would encourage the manipulation of reported earnings of First Defiance to enhance the compensation of any employee.

The specific SEO Compensation Plans and Employee Compensation Plans reviewed by the Compensation Committee were: (i) the annual Short-Term Incentive Plan for named executive officers and other executive officers, which provides for incentive compensation opportunities based on First Defiance’s financial performance; (ii) various quarterly incentive compensation programs and policies for other employees, which provide incentive compensation opportunities based on a combination of individual and company performance; (iii) the 2001 Stock Option and Incentive Plan, which provides for equity awards; (iv) 2005 Stock Option Plan, which provides for equity awards; (v) the LTIP, which provides for incentive compensation opportunities based on Company performance over a three-year performance period; (vi) First Defiance Deferred Compensation Plan, which permits employees to defer compensation; and (vii) various employment agreements and change in control agreements with named executive officers and other executives, which provide for severance-type benefits and some of which include specific incentive compensation opportunities for employees.

The Compensation Committee concluded that First Defiance’s existing risk-management framework and specific features or elements of the Short-Term Incentive Plan or the quarterly incentive

compensation plans (including those provided for under various employment agreements) do not encourage Senior Executive Officers or other employees to take unnecessary and excessive risks that threaten the value of First Defiance. These specific features and elements include a requirement that First Defiance attain a specified percentage of its quarterly or annual budget before any payouts can be made to executive officers. As a result, incentive compensation opportunities are based on Company-wide performance, a factor over which any individual employee has little control. Nevertheless, as part of its annual evaluation of its incentive compensation program, First Defiance elected to make the following changes to its Short-Term Incentive Plan and quarterly incentive compensation plan design for 2011 by: (i) providing enhanced discretion to the Compensation Committee to reduce or eliminate payments; (ii) modified the retail lender plan to focus on operations and sales while decreasing the use of individual performance goals based on profitability; and (iii) increasing the threshold percentage of quarterly or annual budget to be attained before payouts can be made for executive officers. The Compensation Committee believes that these changes, along with First Defiance’s existing risk management framework and the clawback policies implemented for its 25 most highly compensated employees, operate such that First Defiance’s annual and quarterly incentive compensation plans do not encourage Senior Executive Officers or other employees to take unnecessary and excessive risks that threaten the value of First Defiance or create incentives for any employee to manipulate First Defiance’s reported earnings to enhance the amount of compensation payable under these plans.

The Compensation Committee concluded that First Defiance’s existing risk-management framework and the design of its LTIP do not encourage SEOs or other employees to take unnecessary and excessive risks that threaten the value of First Defiance. The incentive compensation opportunities under the LTIP are based on performance over a three-year performance period, discouraging short-term risk-taking. In addition, the incentive compensation opportunities under the LTIP are based on company performance, a factor over which any individual employee has little control. The Compensation Committee believes that these features, along with First Defiance’s existing risk management framework and the clawback policies implemented for its 25 most highly compensated employees, operate such that the LTIP does not encourage Senior Executive Officers or other employees to take unnecessary and excessive risks that threaten the value of First Defiance or create incentives for any employee to manipulate First Defiance’s reported earnings to enhance the amount of compensation payable under these plans.

The Compensation Committee concluded that amounts payable under the 2001 Stock Option and Incentive Plan, 2005 Stock Option Plan, 2010 Equity Incentive Plan and First Defiance Deferred Compensation Plan, and the employment and change in control agreements (except to the extent described above) are not contingent on First Defiance’s financial or other performance and, consequently, do not encourage Senior Executive Officers or other employees to take unnecessary and excessive risks that threaten the value of First Defiance or create incentives for any employee to manipulate First Defiance’s reported earnings to enhance the amount of compensation payable under these plans.EXECUTIVE COMPENSATION

Samuel S. Strausbaugh, Chairman

John Bookmyer

Stephen Boomer

Jean Hubbard

Thomas A. Voigt

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the Named Executive Officers for the fiscal years ended December 31, 2011, 2010,2013, 2012 and 2009.2011. The Named Executive

Officers include all persons serving as the Company’s Chief Executive Officerour CEO and Chief Financial OfficerCFO during 2011,2013, and theour three other most highly compensated executive officers.