 | NEWS RELEASE |
| | | |
| | Contact: | William J. Small |
| | | Chairman, President and CEO |
| | | (419) 782-5015 |
| | | bsmall@first-fed.com |
| | | |
For Immediate Release
FIRST DEFIANCE ANNOUNCES 2008
THIRD QUARTER EARNINGS
| | · | GAAP EPS of $0.04 per share for 2008 third quarter |
| | · | Provision for Loan Losses increases in difficult credit environment |
| | · | Other-Than-Temporary Impairment of $2.1 million recognized on certain investment securities |
| | · | Net Interest Income increased by $4.3 million or 36% over 2007 third quarter |
| | · | Net Interest Margin up 34 basis points from 2007 third quarter; but off slightly from 2008 second quarter |
DEFIANCE, OHIO (October 20, 2008) – First Defiance Financial Corp. (NASDAQ: FDEF) today announced that net income for its third quarter ended September 30, 2008 totaled $322,000, or $0.04 per diluted share, compared to $3.1 million or $0.44 per diluted share for the quarter ended September 30, 2007.
For the nine month period ended September 30, 2008, First Defiance earned $6.5 million or $0.83 per diluted share compared to $10.3 million or $1.44 per diluted share for the nine month period ended September 30, 2007. The 2008 nine month results included $1.0 million of acquisition-related charges associated with the March 14, 2008 acquisition of Pavilion Bancorp of Adrian, Michigan (Pavilion) and its subsidiary the Bank of Lenawee. Excluding the after-tax impact of those charges, First Defiance had earnings of $7.1 million, or $0.91 per diluted share for the nine-months ended September 30, 2008.
Loan Loss Provision, Investment Portfolio Write-Downs Lead to Lower Results for Quarter
The 2008 third quarter results include expense for provision for loan losses of $4.9 million, compared with just $671,000 in the same period in 2007. In addition, the 2008 third quarter also included approximately $2.1 million of expense ($1.3 million or $0.16 per share after tax) related to impairment of certain securities in the Company’s investment portfolio that management deemed to be other-than-temporary.
“These are very difficult economic times for our country and for our market area in particular,” said William J. Small, Chairman, President and Chief Executive Officer of First Defiance. “These challenges are reflected in our results for the quarter. From the national
perspective, we recognized Other-Than-Temporary Impairment in our investment portfolio when the federal government placed Fannie Mae and Freddie Mac in conservatorship in September. We have an investment in preferred stock of those government sponsored enterprises that cost $2 million when purchased but which declined substantially in value. Those securities were written down to the September 30 market value of $151,000. Also in the 2008 third quarter, we recorded a Provision for Loan Losses of $4.9 million, due primarily to the deterioration of a number of large credits in our commercial portfolio. We recorded specific loan loss provisions on 30 credits that totaled $3.1 million and we had $1.2 million of additional expense for loan charge-offs that exceeded previously recorded allowance amounts.”
Non-performing loans totaled $25.5 million at September 30, 2008, an increase from $17.7 million at June 30, 2008. The September 30 balance included $24.6 million of loans that are 90 days past due on that date and another $900,000 of loans considered non-performing because of changes in terms granted to distressed borrowers. In addition, First Defiance had $4.8 million of Real Estate Owned at September 30, 2008. For the 2008 third quarter, First Defiance recorded charge-offs of $2.2 million, which represented 0.55% of average loans outstanding (annualized) for the quarter.
“We’ve historically taken great pride in our asset quality and I still believe our underwriting standards are sound,” said Mr. Small. “However, we now have situations where good customers are struggling to make their payments. In some cases, they’re in industries that are in the thick of the current downturn and in other cases health issues or other factors have caused them to fall behind. At the same time, real estate values have declined and some collateral-dependent loans no longer have enough collateral value to support the outstanding balance. We are proactively working to identify all potential problems and mitigate our losses as much as possible. At this time, I believe we’ve provided a conservative level of provision expense for all of the problem loans that we have identified in our portfolio.”
Margin Improved by 35 basis points; Service Fee Income Increases Significantly
“Despite the bottom-line quarterly results, there were positive developments this quarter,” said Mr. Small. “Net interest margin remains strong at 3.81%, which was a 34 basis point improvement over last year’s third quarter, though it was off 11 basis points from the second quarter of 2008 level of 3.92%. Excluding investment securities losses due to impairment-related charges, non-interest income for the 2008 third quarter improved by 11% over last year’s third quarter with service fees up by more than 34% between those two periods.”
Net interest margin improvement was driven by a 142 basis point decline in interest-bearing liabilities, to 2.65% in the 2008 third quarter compared to 4.07% for the same period in 2007. That decline more than offset a 96 basis point drop in yields on interest-earning assets. The margin also improved due to growth in interest-earning assets following the Pavilion acquisition and substantial growth in non-interest bearing liabilities. At September 30, 2008, non-interest bearing deposits were 11.0% of total deposits, compared to 10.0% at December 31, 2007.
“Despite the improvement over last year’s third quarter, we are seeing pressure on our net interest margin,” noted Mr. Small. “Our asset yields and average loan rates are down 12 and 13 basis points, respectively from this year’s second quarter while our deposit costs are down just
two basis points. As a result, the overall margin slipped from 3.92% to 3.81%. Customers are currently migrating to CDs to get yield. This flow of funding sources from savings and money market accounts to CDs has had a negative impact on our overall cost of funds. With the 50 basis point cut in the Fed Funds rate last week, I think we’ll continue to experience downward pressure on our margin for the balance of this year.”
Investment Portfolio Matters
The majority of the Other-Than-Temporary Impairment (OTTI) recognized by First Defiance in the 2008 third quarter related to the write-down of preferred stock issued by Fannie Mae and Freddie Mac. First Defiance invested $1 million in the preferred shares of each agency in January 2008 and wrote those investments down to $87,000 (Fannie Mae) and $64,000 (Freddie Mac) at September 30, 2008. The Company also recorded $150,000 of additional OTTI on its investment in the equity notes of two Trust Preferred Collateralized Debt Obligations (CDOs) in the 2008 third quarter. At September 30, 2008, the value of those CDOs, which had a total original cost of $1 million, had been written down to $168,000.
First Defiance has other Trust Preferred CDO investments with a total original cost of $8.8 million and market values of $2.6 million at September 30, 2008. The decline in value of those investments is primarily due to the overall lack of liquidity in the CDO market as the investments continue to pay principal and interest payments in accordance with the contractual terms of the securities. Management has not deemed the impairment in value of these CDO investments to be Other-Than-Temporary and therefore has not recognized the reduction in value of those investments in earnings.
Non-Interest Expenses Rise Due to Acquisition
Total non-interest expense increased to $15.2 million for the quarter ended September 30, 2008, an increase of 23.9% from the $12.3 million of non-interest expense recognized in the 2007 third quarter. Increases across the board are attributable to the Pavilion acquisition, which closed late in the 2008 first quarter. The efficiency ratio for the 2008 third quarter was 66.8% compared to 69.2% in the third quarter of 2007.
Year-To-Date Results
For the nine month period ended September 30, 2008, net interest income totaled $46.2 million, a $10.1 million or 27.9% increase over the first nine months of 2007. Average interest-earning assets increased to $1.63 billion for the nine months ended September 30, 2008 compared to $1.38 billion in 2007, the result of the Pavilion acquisition. Net interest margin for the first nine months of 2008 was 3.83%, up 27 basis points from the 3.56% margin reported in the nine month period ended September 30, 2007.
The provision for loan losses for the 2008 year-to-date period was $8.8 million, compared to just $1.7 million recorded during the first nine months of 2007.
Non-interest income for the period ended September 30, 2008 was $16.3 million compared to $16.9 million during the same period of 2007. The 2008 results include securities losses of $2.6 million recognized year-to-date for OTTI charges recognized for impaired investment securities. Excluding the loss on securities, most of the remaining non-interest
income increase was attributable to service fees and other charges, which were $9.8 million for the first nine months of 2008 compared to $8.0 million during the same period in 2007. In addition, mortgage banking income increased by $847,000 and insurance commission income increased by $137,000 between the 2007 and 2008 periods.
Non-interest expense increased to $44.2 million for the first nine months of 2008 from $35.9 million in 2007. Excluding one-time acquisition-related charges of $1.0 million, non-interest expense increased by 20.1%. Most of this increase relates to ongoing costs of operating the eight branches acquired in the Pavilion acquisition. In addition, FDIC insurance expense has increased by $691,000 due to changes in the assessment rates and full utilization of credits issued by the FDIC early in the 2008 first quarter. Non-interest expense also includes $752,000 of expense associated with losses related to a former investment advisor, which were recorded in the 2008 second quarter following the denial of coverage under the Company’s fidelity bond.
Total Assets at $1.92 Billion
Total assets at September 30, 2008 were $1.92 billion, compared to $1.61 billion at December 31, 2007. Net loans receivable (excluding loans held for sale) were $1.57 billion at September 30, 2008 compared to $1.28 billion at December 31, 2007. Total deposits at September 30, 2008 were $1.44 billion compared to $1.22 billion at December 31, 2007. Non-interest bearing deposits at September 30, 2008 were $158.1 million compared to $121.6 million at December 31, 2007. Total stockholders’ equity was $189.7 million at September 30, 2008 compared to $166.0 million at the end of 2007, with the increase attributable to the 1,036,861 shares of First Defiance issued in the Pavilion acquisition. Also at September 30, 2008, goodwill and other intangible assets totaled $65.6 million compared to $40.4 million at December 31, 2007. The balance sheet changes are primarily attributable to the Pavilion acquisition.
Impact of Recent Developments
“This is the most difficult operating environment I’ve experienced in my 30 years in banking,” said Mr. Small. “But I believe it is a time of great opportunity for community banks like ours. We remain well capitalized with risk-based capital that is nearly 20% more than the regulatory standard to be considered well capitalized. We have never been involved in the sub-prime lending market, which is at the heart of the recent crisis. First Federal Bank and First Defiance are positioned to continue following the business plan that has served us well over the years and prepares us for times like this. Needless to say, there are better environments to operate in, but we will continue to work with our customers and offer the best in products and services as we look forward to better times.”
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, October 21, 2008 to discuss the earnings results and business trends. The conference call may be accessed by calling 800-860-2442.
Internet access to the call is also available (in listen-only mode) at the following Web address: http://www.talkpoint.com/viewer/starthere.asp?Pres=123058 ..
The audio replay of the Internet Webcast will be available at www.fdef.com until Tuesday, November 4, 2008.
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 & Investments. First Federal operates 36 full service branches and 47 ATM locations in northwest Ohio, southeast Michigan and Fort Wayne, Indiana. First Insurance & Investments specializes in property and casualty and group health and life insurance, with offices in Defiance and Bowling Green, 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: 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 OREO properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission (SEC) filings, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. One or more of these factors have affected or could in the future affect the Company’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.
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| Consolidated Balance Sheets | | | | | | | | | |
| First Defiance Financial Corp. | | (Unaudited) | | | | | | | |
| | | | | | | | | | |
| | | September 30, | | | December 31, | | | September 30, | |
| (in thousands) | | 2008 | | | 2007 | | | 2007 | |
| | | | | | | | | | |
| Assets | | | | | | | | | |
| Cash and cash equivalents | | | | | | | | | |
| Cash and amounts due from depository institutions | | $ | 34,230 | | | $ | 53,976 | | | $ | 30,558 | |
| Interest-bearing deposits | | | 358 | | | | 11,577 | | | | 29,379 | |
| | | | 34,588 | | | | 65,553 | | | | 59,937 | |
| Securities | | | | | | | | | | | | |
| Available-for sale, carried at fair value | | | 113,036 | | | | 112,370 | | | | 111,236 | |
| Held-to-maturity, carried at amortized cost | | | 978 | | | | 1,117 | | | | 1,236 | |
| | | | 114,014 | | | | 113,487 | | | | 112,472 | |
| | | | | | | | | | | | | |
| Loans | | | 1,596,327 | | | | 1,289,696 | | | | 1,264,872 | |
| Allowance for loan losses | | | (23,445 | ) | | | (13,890 | ) | | | (13,427 | ) |
| Loans, net | | | 1,572,882 | | | | 1,275,806 | | | | 1,251,445 | |
| Loans held for sale | | | 9,363 | | | | 5,751 | | | | 7,426 | |
| Mortgage servicing rights | | | 9,335 | | | | 5,973 | | | | 5,917 | |
| Accrued interest receivable | | | 8,672 | | | | 6,755 | | | | 8,102 | |
| Federal Home Loan Bank stock | | | 21,376 | | | | 18,586 | | | | 18,586 | |
| Bank Owned Life Insurance | | | 29,174 | | | | 28,423 | | | | 28,315 | |
| Office properties and equipment | | | 47,379 | | | | 40,545 | | | | 38,287 | |
| Real estate and other assets held for sale | | | 4,776 | | | | 2,460 | | | | 3,392 | |
| Goodwill | | | 56,830 | | | | 36,820 | | | | 36,515 | |
| Core deposit and other intangibles | | | 8,771 | | | | 3,551 | | | | 3,717 | |
| Other assets | | | 4,866 | | | | 5,694 | | | | 5,835 | |
| Total Assets | | $ | 1,922,026 | | | $ | 1,609,404 | | | $ | 1,579,946 | |
| | | | | | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | | | | | |
| Non-interest-bearing deposits | | $ | 158,139 | | | $ | 121,563 | | | $ | 109,128 | |
| Interest-bearing deposits | | | 1,277,665 | | | | 1,096,295 | | | | 1,099,036 | |
| Total deposits | | | 1,435,804 | | | | 1,217,858 | | | | 1,208,164 | |
| Advances from Federal Home Loan Bank | | | 173,581 | | | | 139,536 | | | | 128,461 | |
| Notes payable and other interest-bearing liabilities | | | 70,238 | | | | 30,055 | | | | 24,645 | |
| Subordinated debentures | | | 36,083 | | | | 36,083 | | | | 36,083 | |
| Advance payments by borrowers for tax and insurance | | | 496 | | | | 762 | | | | 430 | |
| Deferred taxes | | | 1,469 | | | | 1,306 | | | | 1,292 | |
| Other liabilities | | | 14,679 | | | | 17,850 | | | | 16,165 | |
| Total liabilities | | | 1,732,350 | | | | 1,443,450 | | | | 1,415,240 | |
| Stockholders’ Equity | | | | | | | | | | | | |
| Preferred stock | | | - | | | | - | | | | - | |
| Common stock, net | | | 127 | | | | 117 | | | | 117 | |
| Additional paid-in-capital | | | 140,360 | | | | 112,651 | | | | 112,587 | |
| Stock acquired by ESOP | | | - | | | | (202 | ) | | | (202 | ) |
| Accumulated other comprehensive loss | | | (4,933 | ) | | | (415 | ) | | | (699 | ) |
| Retained earnings | | | 126,760 | | | | 126,630 | | | | 124,899 | |
| Treasury stock, at cost | | | (72,638 | ) | | | (72,827 | ) | | | (71,996 | ) |
| Total stockholders’ equity | | | 189,676 | | | | 165,954 | | | | 164,706 | |
| Total liabilities and stockholders’ equity | | $ | 1,922,026 | | | $ | 1,609,404 | | | $ | 1,579,946 | |
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| Consolidated Statements of Income (Unaudited) | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| (in thousands, except per share amounts) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Interest Income: | | | | | | | | | | | | |
| Loans | | $ | 24,902 | | | $ | 22,983 | | | $ | 72,220 | | | $ | 67,882 | |
| Investment securities | | | 1,435 | | | | 1,439 | | | | 4,382 | | | | 4,290 | |
| Interest-bearing deposits | | | 5 | | | | 262 | | | | 119 | | | | 483 | |
| FHLB stock dividends | | | 301 | | | | 305 | | | | 797 | | | | 898 | |
| Total interest income | | | 26,643 | | | | 24,989 | | | | 77,518 | | | | 73,553 | |
| Interest Expense: | | | | | | | | | | | | | | | | |
| Deposits | | | 7,658 | | | | 10,536 | | | | 23,851 | | | | 30,130 | |
| FHLB advances and other | | | 1,603 | | | | 1,636 | | | | 4,803 | | | | 5,253 | |
| Subordinated debentures | | | 461 | | | | 597 | | | | 1,445 | | | | 1,518 | |
| Notes Payable | | | 555 | | | | 193 | | | | 1,217 | | | | 519 | |
| Total interest expense | | | 10,277 | | | | 12,962 | | | | 31,316 | | | | 37,420 | |
| Net interest income | | | 16,366 | | | | 12,027 | | | | 46,202 | | | | 36,133 | |
| Provision for loan losses | | | 4,907 | | | | 671 | | | | 8,761 | | | | 1,704 | |
| Net interest income after provision for loan losses | | | 11,459 | | | | 11,356 | | | | 37,441 | | | | 34,429 | |
| Non-interest Income: | | | | | | | | | | | | | | | | |
| Service fees and other charges | | | 3,717 | | | | 2,764 | | | | 9,756 | | | | 7,997 | |
| Mortgage banking income | | | 1,011 | | | | 921 | | | | 3,627 | | | | 2,780 | |
| Gain on sale of non-mortgage loans | | | 134 | | | | 138 | | | | 177 | | | | 204 | |
| Loss on securities | | | (2,051 | ) | | | 21 | | | | (2,564 | ) | | | 21 | |
| Insurance and investment sales commissions | | | 1,179 | | | | 1,180 | | | | 4,381 | | | | 4,244 | |
| Trust income | | | 114 | | | | 95 | | | | 343 | | | | 280 | |
| Income from Bank Owned Life Insurance | | | 224 | | | | 321 | | | | 751 | | | | 929 | |
| Other non-interest income | | | (188 | ) | | | 144 | | | | (166 | ) | | | 407 | |
| Total Non-interest Income | | | 4,140 | | | | 5,584 | | | | 16,305 | | | | 16,862 | |
| Non-interest Expense: | | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 7,980 | | | | 6,424 | | | | 22,421 | | | | 19,610 | |
| Occupancy | | | 1,949 | | | | 1,516 | | | | 5,562 | | | | 4,324 | |
| State franchise tax | | | 533 | | | | 355 | | | | 1,540 | | | | 1,074 | |
| Acquisition related charges | | | 20 | | | | - | | | | 1,032 | | | | - | |
| Data processing | | | 1,221 | | | | 941 | | | | 3,384 | | | | 2,838 | |
| Amortization of intangibles | | | 424 | | | | 167 | | | | 1,035 | | | | 481 | |
| Other non-interest expense | | | 3,106 | | | | 2,893 | | | | 9,250 | | | | 7,623 | |
| Total Non-interest Expense | | | 15,233 | | | | 12,296 | | | | 44,224 | | | | 35,950 | |
| Income before income taxes | | | 366 | | | | 4,644 | | | | 9,522 | | | | 15,341 | |
| Income taxes | | | 44 | | | | 1,515 | | | | 3,046 | | | | 4,995 | |
| Net Income | | $ | 322 | | | $ | 3,129 | | | $ | 6,476 | | | $ | 10,346 | |
| | | | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.04 | | | $ | 0.44 | | | $ | 0.83 | | | $ | 1.46 | |
| Diluted | | $ | 0.04 | | | $ | 0.44 | | | $ | 0.83 | | | $ | 1.44 | |
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| Core operating earnings per share*: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.04 | | | $ | 0.44 | | | $ | 0.91 | | | $ | 1.46 | |
| Diluted | | $ | 0.04 | | | $ | 0.44 | | | $ | 0.91 | | | $ | 1.44 | |
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| Average Shares Outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 8,113 | | | | 7,080 | | | | 7,813 | | | | 7,101 | |
| Diluted | | | 8,123 | | | | 7,171 | | | | 7,842 | | | | 7,201 | |
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| * - See Non-GAAP Disclosure Reconciliations | | | | | | | | | | | | | | | | |
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| Financial Summary and Comparison | | | | | | | | | | | | | | | | | | |
| First Defiance Financial Corp. | | (Unaudited) | | | | | | | | | | |
| | | Three Months Ended | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| (dollars in thousands, except per share data) | | 2008 | | | 2007 | | | % change | | | 2008 | | | 2007 | | | % change | |
| Summary of Operations | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Tax-equivalent interest income (1) | | | 26,876 | | | | 25,177 | | | | 6.7 | | | | 78,171 | | | | 74,090 | | | | 5.5 | |
| Interest expense | | | 10,277 | | | | 12,962 | | | | (20.7 | ) | | | 31,316 | | | | 37,420 | | | | (16.3 | ) |
| Tax-equivalent net interest income (1) | | | 16,599 | | | | 12,215 | | | | 35.9 | | | | 46,855 | | | | 36,670 | | | | 27.8 | |
| Provision for loan losses | | | 4,907 | | | | 671 | | | | 631.3 | | | | 8,761 | | | | 1,704 | | | | 414.1 | |
| Tax-equivalent NII after provision for loan loss (1) | | | 11,692 | | | | 11,544 | | | | 1.3 | | | | 38,094 | | | | 34,966 | | | | 8.9 | |
| Securities losses | | | (2,051 | ) | | | 21 | | | NM | | | | (2,564 | ) | | | 21 | | | NM | |
| Non-interest income-excluding securities losses | | | 6,191 | | | | 5,563 | | | | 11.3 | | | | 18,869 | | | | 16,841 | | | | 12.0 | |
| Non-interest expense | | | 15,233 | | | | 12,296 | | | | 23.9 | | | | 44,224 | | | | 35,950 | | | | 23.0 | |
| Non-interest expense-excluding non-core charges | | | 15,213 | | | | 12,296 | | | | 23.7 | | | | 43,192 | | | | 35,950 | | | | 20.1 | |
| One time acquisition related charges | | | 20 | | | | - | | | NM | | | | 1,032 | | | | - | | | NM | |
| Income taxes | | | 44 | | | | 1,515 | | | | (97.1 | ) | | | 3,046 | | | | 4,995 | | | | (39.0 | ) |
| Net Income | | | 322 | | | | 3,129 | | | | (89.7 | ) | | | 6,476 | | | | 10,346 | | | | (37.4 | ) |
| Core operating earnings (2) | | | 335 | | | | 3,129 | | | | (89.3 | ) | | | 7,147 | | | | 10,346 | | | | (30.9 | ) |
| Tax equivalent adjustment (1) | | | 233 | | | | 188 | | | | 23.9 | | | | 653 | | | | 537 | | | | 21.6 | |
| At Period End | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | | | 1,922,026 | | | | 1,579,946 | | | | 21.7 | | | | | | | | | | | | | |
| Earning assets | | | 1,741,438 | | | | 1,432,735 | | | | 21.5 | | | | | | | | | | | | | |
| Loans | | | 1,596,327 | | | | 1,264,872 | | | | 26.2 | | | | | | | | | | | | | |
| Allowance for loan losses | | | 23,445 | | | | 13,427 | | | | 74.6 | | | | | | | | | | | | | |
| Deposits | | | 1,435,804 | | | | 1,208,164 | | | | 18.8 | | | | | | | | | | | | | |
| Stockholders’ equity | | | 189,676 | | | | 164,706 | | | | 15.2 | | | | | | | | | | | | | |
| Average Balances | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | | | 1,928,987 | | | | 1,550,174 | | | | 24.4 | | | | 1,824,197 | | | | 1,529,404 | | | | 19.3 | |
| Earning assets | | | 1,727,343 | | | | 1,397,521 | | | | 23.6 | | | | 1,630,873 | | | | 1,377,499 | | | | 18.4 | |
| Deposits and interest-bearing liabilities | | | 1,712,212 | | | | 1,367,421 | | | | 25.2 | | | | 1,611,785 | | | | 1,347,872 | | | | 19.6 | |
| Loans | | | 1,585,489 | | | | 1,244,531 | | | | 27.4 | | | | 1,485,455 | | | | 1,233,987 | | | | 20.4 | |
| Deposits | | | 1,437,273 | | | | 1,177,594 | | | | 22.1 | | | | 1,365,631 | | | | 1,154,718 | | | | 18.3 | |
| Stockholders’ equity | | | 194,452 | | | | 164,751 | | | | 18.0 | | | | 187,330 | | | | 163,490 | | | | 14.6 | |
| Stockholders’ equity / assets | | | 10.08 | % | | | 10.63 | % | | | (5.2 | ) | | | 10.27 | % | | | 10.69 | % | | | (3.9 | ) |
| Per Common Share Data | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Income | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.04 | | | $ | 0.44 | | | | (90.9 | ) | | $ | 0.83 | | | $ | 1.46 | | | | (43.2 | ) |
| Diluted | | | 0.04 | | | | 0.44 | | | | (90.9 | ) | | | 0.83 | | | | 1.44 | | | | (42.4 | ) |
| Core operating earnings (2) | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.04 | | | $ | 0.44 | | | | (90.7 | ) | | $ | 0.91 | | | $ | 1.46 | | | | (37.2 | ) |
| Diluted | | | 0.04 | | | | 0.44 | | | | (90.5 | ) | | | 0.91 | | | | 1.44 | | | | (36.6 | ) |
| Dividends | | | 0.26 | | | | 0.25 | | | | 4.0 | | | | 0.78 | | | | 0.75 | | | | 4.0 | |
| Market Value: | | | | | | | | | | | | | | | | | | | | | | | | |
| High | | $ | 17.66 | | | $ | 29.64 | | | | (40.4 | ) | | $ | 22.51 | | | $ | 30.25 | | | | (25.6 | ) |
| Low | | | 10.00 | | | | 23.99 | | | | (58.3 | ) | | | 10.00 | | | | 23.99 | | | | (58.3 | ) |
| Close | | | 11.01 | | | | 27.00 | | | | (59.2 | ) | | | 11.01 | | | | 27.00 | | | | (59.2 | ) |
| Book Value | | | 23.37 | | | | 23.21 | | | | 0.7 | | | | 23.37 | | | | 23.21 | | | | 0.7 | |
| Tangible Book Value | | | 15.29 | | | | 17.54 | | | | (12.9 | ) | | | 15.29 | | | | 17.54 | | | | (12.9 | ) |
| Shares outstanding, end of period (000) | | | 8,117 | | | | 7,095 | | | | 14.4 | | | | 8,117 | | | | 7,095 | | | | 14.4 | |
| Performance Ratios (annualized) | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest margin (1) | | | 3.81 | % | | | 3.47 | % | | | 9.9 | | | | 3.83 | % | | | 3.56 | % | | | 7.7 | |
| Return on average assets -GAAP | | | 0.07 | % | | | 0.80 | % | | | (91.7 | ) | | | 0.47 | % | | | 0.90 | % | | | (47.3 | ) |
| Return on average assets -Core Operating | | | 0.07 | % | | | 0.80 | % | | | (91.4 | ) | | | 0.52 | % | | | 0.90 | % | | | (41.9 | ) |
| Return on average equity- GAAP | | | 0.66 | % | | | 7.53 | % | | | (91.3 | ) | | | 4.62 | % | | | 8.46 | % | | | (45.4 | ) |
| Return on average equity- Core Operating | | | 0.69 | % | | | 7.53 | % | | | (90.9 | ) | | | 5.10 | % | | | 8.46 | % | | | (39.8 | ) |
| Efficiency ratio (3) -GAAP | | | 66.84 | % | | | 69.16 | % | | | (3.4 | ) | | | 67.29 | % | | | 67.18 | % | | | 0.2 | |
| Efficiency ratio (3) -Core Operating | | | 66.75 | % | | | 69.16 | % | | | (3.5 | ) | | | 65.72 | % | | | 67.18 | % | | | (2.2 | ) |
| Effective tax rate | | | 12.02 | % | | | 32.62 | % | | | (63.1 | ) | | | 31.99 | % | | | 32.56 | % | | | (1.8 | ) |
| Dividend payout ratio (basic) | | | 650.00 | % | | | 56.82 | % | | NM | | | | 93.98 | % | | | 51.37 | % | | | 82.9 | |
| (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) Core operating earnings = Net income plus after tax effect of acquisition related and other one-time charges. See Non-GAAP |
| Disclosure Reconciliation. |
| (3) Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, |
| excluding securities gains or losses, net and asset sales gains, net. |
| NM Percentage change not meaningful |
| Non-GAAP Disclosure Reconciliations |
| First Defiance Financial Corp. |
Management believes that the presentation of the non-GAAP financial measures in this release assists investors when comparing results period-to-period in a more meaningful and consistent manner and provides a better measure of results for First Defiance's ongoing operations. Core operating earnings are net income adjusted to exclude discontinued operations, merger, integration and restructuring expenses and the results of certain significant transactions not representative of ongoing operations. |
| | | | | | | | | | | | | |
| | | Three months ended | | | Nine months ended | |
| Core Operating Earnings | | September 30, | | | September 30, | |
| (dollars in thousands, except per share data) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Net Income | | $ | 322 | | | $ | 3,129 | | | $ | 6,476 | | | $ | 10,346 | |
| | | | | | | | | | | | | | | | | |
| Acquisition related charges | | | 20 | | | | - | | | | 1,032 | | | | - | |
| Tax effect | | | (7 | ) | | - | | | | (361 | ) | | - | |
| After-tax non-operating items | | | 13 | | | - | | | | 671 | | | - | |
| Core operating earnings | | $ | 335 | | $ | 3,129 | | | $ | 7,147 | | $ | 10,346 | |
| Acquisition related charges in 2008 reflect charges associated with the acquisition of Pavilion Bancorp. |
| Core operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, non-operating items are deducted from non-interest expense in the numerator and non-interest income in the denominator of the core operating efficiency ratio disclosed in the tables. Comparable information on a GAAP basis is also provided in the tables. |
| Income from Mortgage Banking |
| |
Revenue from sales and servicing of mortgage loans consisted of the following:
| | | Three months ended | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| (dollars in thousands) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | | | | | | | | | | | |
| Gain from sale of mortgage loans | | $ | 624 | | | $ | 674 | | | $ | 2,808 | | | $ | 1,992 | |
| Mortgage loan servicing revenue (expense): | | | | | | | | | | | | | | | | |
| Mortgage loan servicing revenue | | | 691 | | | | 422 | | | | 1,839 | | | | 1,266 | |
| Amortization of mortgage servicing rights | | | (268 | ) | | | (150 | ) | | | (1,008 | ) | | | (480 | ) |
| Mortgage servicing rights valuation adjustments | | | (36 | ) | | (25 | ) | | | (12 | ) | | 2 | |
| | | | 387 | | | 247 | | | | 819 | | | 788 | |
| Total revenue from sale and servicing of mortgage loans | | $ | 1,011 | | $ | 921 | | | $ | 3,627 | | $ | 2,780 | |
| | |
| | | | | | | | | | | | | | | | | | | |
| Yield Analysis | | | | | | | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | |
| | | 2008 | | | 2007 | |
| | | Average | | | | | | Yield | | | Average | | | | | | Yield | |
| | | Balance | | | Interest(1) | | Rate(2) | | Balance | | | Interest(1) | | Rate(2) | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 1,585,489 | | | $ | 24,934 | | | | 6.26 | % | | $ | 1,244,531 | | | $ | 22,995 | | | | 7.33 | % |
| Securities | | | 118,502 | | | | 1,636 | | | | 5.31 | % | | | 112,645 | | | | 1,615 | | | | 5.66 | % |
| Interest Bearing Deposits | | | 2,231 | | | | 5 | | | | 0.89 | % | | | 21,760 | | | | 262 | | | | 4.78 | % |
| FHLB stock | | | 21,121 | | | | 301 | | | | 5.67 | % | | | 18,585 | | | | 305 | | | | 6.51 | % |
| Total interest-earning assets | | | 1,727,343 | | | | 26,876 | | | | 6.18 | % | | | 1,397,521 | | | | 25,177 | | | | 7.14 | % |
| Non-interest-earning assets | | | 201,644 | | | | | | | | | | | | 152,653 | | | | | | | | | |
| Total assets | | $ | 1,928,987 | | | | | | | | | | | $ | 1,550,174 | | | | | | | | | |
| Deposits and Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | $ | 1,268,016 | | | $ | 7,658 | | | | 2.40 | % | | $ | 1,074,413 | | | $ | 10,536 | | | | 3.89 | % |
| FHLB advances and other | | | 174,343 | | | | 1,603 | | | | 3.66 | % | | | 128,597 | | | | 1,636 | | | | 5.05 | % |
| Other Borrowings | | | 64,368 | | | | 555 | | | | 3.43 | % | | | 24,935 | | | | 193 | | | | 3.07 | % |
| Subordinated debentures | | | 36,228 | | | | 461 | | | | 5.06 | % | | | 36,295 | | | | 597 | | | | 6.53 | % |
| Total interest-bearing liabilities | | | 1,542,955 | | | | 10,277 | | | | 2.65 | % | | | 1,264,240 | | | | 12,962 | | | | 4.07 | % |
| Non-interest bearing deposits | | | 169,257 | | | | - | | | | - | | | | 103,181 | | | | - | | | | - | |
| Total including non-interest-bearing demand deposits | | | 1,712,212 | | | | 10,277 | | | | 2.39 | % | | | 1,367,421 | | | | 12,962 | | | | 3.76 | % |
| Other non-interest-bearing liabilities | | | 22,323 | | | | | | | | | | | | 18,002 | | | | | | | | | |
| Total liabilities | | | 1,734,535 | | | | | | | | | | | | 1,385,423 | | | | | | | | | |
| Stockholders' equity | | | 194,452 | | | | | | | | | | | | 164,751 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,928,987 | | | | | | | | | | | $ | 1,550,174 | | | | | | | | | |
| Net interest income; interest rate spread | | | $ | 16,599 | | | | 3.53 | % | | | | | | $ | 12,215 | | | | 3.07 | % |
| Net interest margin (3) | | | | | | | | | | | 3.81 | % | | | | | | | | | | | 3.47 | % |
| Average interest-earning assets to average interest bearing liabilities | | | 112 | % | | | | | | | | | | | 111 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, | |
| | | 2008 | | | 2007 | |
| | | Average | | | | | | | Yield | | | Average | | | | | | | Yield | |
| | | Balance | | | Interest(1) | | Rate(2) | | Balance | | | Interest(1) | | Rate(2) | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 1,485,455 | | | $ | 72,297 | | | | 6.50 | % | | $ | 1,233,987 | | | $ | 67,916 | | | | 7.36 | % |
| Securities | | | 118,908 | | | | 4,959 | | | | 5.50 | % | | | 112,466 | | | | 4,795 | | | | 5.68 | % |
| Interest Bearing Deposits | | | 6,311 | | | | 119 | | | | 2.52 | % | | | 12,461 | | | | 483 | | | | 5.18 | % |
| FHLB stock | | | 20,199 | | | | 797 | | | | 5.27 | % | | | 18,585 | | | | 898 | | | | 6.46 | % |
| Total interest-earning assets | | | 1,630,873 | | | | 78,172 | | | | 6.40 | % | | | 1,377,499 | | | | 74,092 | | | | 7.19 | % |
| Non-interest-earning assets | | | 193,324 | | | | | | | | | | | | 151,905 | | | | | | | | | |
| Total assets | | $ | 1,824,197 | | | | | | | | | | | $ | 1,529,404 | | | | | | | | | |
| Deposits and Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | $ | 1,210,631 | | | $ | 23,851 | | | | 2.63 | % | | $ | 1,053,810 | | | $ | 30,130 | | | | 3.82 | % |
| FHLB advances and other | | | 161,891 | | | | 4,803 | | | | 3.96 | % | | | 139,087 | | | | 5,253 | | | | 5.05 | % |
| Other Borrowings | | | 48,018 | | | | 1,217 | | | | 3.39 | % | | | 22,920 | | | | 519 | | | | 3.03 | % |
| Subordinated debentures | | | 36,245 | | | | 1,445 | | | | 5.33 | % | | | 31,147 | | | | 1,518 | | | | 6.52 | % |
| Total interest-bearing liabilities | | | 1,456,785 | | | | 31,316 | | | | 2.87 | % | | | 1,246,964 | | | | 37,420 | | | | 4.01 | % |
| Non-interest bearing deposits | | | 155,000 | | | | - | | | | - | | | | 100,908 | | | | - | | | | - | |
| Total including non-interest-bearing demand deposits | | | 1,611,785 | | | | 31,316 | | | | 2.60 | % | | | 1,347,872 | | | | 37,420 | | | | 3.71 | % |
| Other non-interest-bearing liabilities | | | 25,082 | | | | | | | | | | | | 18,042 | | | | | | | | | |
| Total liabilities | | | 1,636,867 | | | | | | | | | | | | 1,365,914 | | | | | | | | | |
| Stockholders' equity | | | 187,330 | | | | | | | | | | | | 163,490 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,824,197 | | | | | | | | | | | $ | 1,529,404 | | | | | | | | | |
| Net interest income; interest rate spread | | | $ | 46,856 | | | | 3.53 | % | | | | | | $ | 36,672 | | | | 3.18 | % |
| Net interest margin (3) | | | | | | | | | | | 3.83 | % | | | | | | | | | | | 3.56 | % |
| Average interest-earning assets to average interest bearing liabilities | | | 112 | % | | | | | | | | | | | 110 | % |
| (1) Interest on certain tax exempt loans and securities is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to |
| taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 35%. |
| (2) Annualized | | | | | | | | | | | |
| (3) Net interest margin is net interest income divided by average interest-earning assets. | | |
| | | | | | | | | | | | | | | | |
| Selected Quarterly Information | | | | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (dollars in thousands, except per share data) | | 3rd Qtr 2008 | | | 2nd Qtr 2008 | | | 1st Qtr 2008 | | | 4th Qtr 2007 | | | 3rd Qtr 2007 | |
| Summary of Operations | | | | | | | | | | | | | | | |
| Tax-equivalent interest income (1) | | $ | 26,876 | | | $ | 26,453 | | | $ | 24,843 | | | $ | 25,383 | | | $ | 25,177 | |
| Interest expense | | | 10,277 | | | | 9,991 | | | | 11,048 | | | | 12,669 | | | | 12,962 | |
| Tax-equivalent net interest income (1) | | | 16,599 | | | | 16,462 | | | | 13,795 | | | | 12,714 | | | | 12,215 | |
| Provision for loan losses | | | 4,907 | | | | 2,797 | | | | 1,058 | | | | 603 | | | | 671 | |
| Tax-equivalent NII after provision for loan losses (1) | | | 11,692 | | | | 13,665 | | | | 12,737 | | | | 12,111 | | | | 11,544 | |
| Investment securities gains (losses) | | | (2,051 | ) | | | (432 | ) | | | (81 | ) | | | - | | | | 21 | |
| Non-interest income (excluding securities gains/losses) | | | 6,191 | | | | 6,582 | | | | 6,096 | | | | 5,268 | | | | 5,563 | |
| Non-interest expense | | | 15,233 | | | | 15,515 | | | | 13,476 | | | | 12,161 | | | | 12,296 | |
| Acquisition and other on-time charges | | | 20 | | | | 262 | | | | 750 | | | | - | | | | - | |
| Income taxes | | | 44 | | | | 1,349 | | | | 1,653 | | | | 1,474 | | | | 1,515 | |
| Net income | | | 322 | | | | 2,735 | | | | 3,419 | | | | 3,558 | | | | 3,129 | |
| Core operating earnings (2) | | | 335 | | | | 2,905 | | | | 3,906 | | | | 3,558 | | | | 3,129 | |
| Tax equivalent adjustment (1) | | | 233 | | | | 216 | | | | 204 | | | | 186 | | | | 188 | |
| At Period End | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,922,026 | | | $ | 1,928,925 | | | $ | 1,886,047 | | | $ | 1,609,404 | | | $ | 1,579,946 | |
| Earning assets | | | 1,741,438 | | | | 1,736,238 | | | | 1,689,813 | | | | 1,439,097 | | | | 1,432,735 | |
| Loans | | | 1,596,327 | | | | 1,582,751 | | | | 1,535,354 | | | | 1,289,696 | | | | 1,264,872 | |
| Allowance for loan losses | | | 23,445 | | | | 20,578 | | | | 18,556 | | | | 13,890 | | | | 13,427 | |
| Deposits | | | 1,435,804 | | | | 1,427,141 | | | | 1,413,701 | | | | 1,217,858 | | | | 1,208,164 | |
| Stockholders’ equity | | | 189,676 | | | | 194,280 | | | | 194,780 | | | | 165,954 | | | | 164,706 | |
| Stockholders’ equity / assets | | | 9.87 | % | | | 10.07 | % | | | 10.33 | % | | | 10.31 | % | | | 10.42 | % |
| Goodwill | | | 56,830 | | | | 56,111 | | | | 57,315 | | | | 36,820 | | | | 36,515 | |
| Average Balances | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,928,987 | | | $ | 1,898,165 | | | $ | 1,645,436 | | | $ | 1,589,264 | | | $ | 1,550,174 | |
| Earning assets | | | 1,727,343 | | | | 1,689,398 | | | | 1,475,882 | | | | 1,432,061 | | | | 1,397,521 | |
| Deposits and interest-bearing liabilities | | | 1,712,212 | | | | 1,678,026 | | | | 1,445,113 | | | | 1,404,065 | | | | 1,367,421 | |
| Loans | | | 1,585,489 | | | | 1,544,409 | | | | 1,326,468 | | | | 1,265,307 | | | | 1,244,531 | |
| Deposits | | | 1,437,273 | | | | 1,423,266 | | | | 1,236,354 | | | | 1,212,486 | | | | 1,177,594 | |
| Stockholders’ equity | | | 194,452 | | | | 195,845 | | | | 171,693 | | | | 165,762 | | | | 164,751 | |
| Stockholders’ equity / assets | | | 10.08 | % | | | 10.32 | % | | | 10.43 | % | | | 10.43 | % | | | 10.63 | % |
| Per Common Share Data | | | | | | | | | | | | | | | | | | | | |
| Net Income: | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.04 | | | $ | 0.34 | | | $ | 0.48 | | | $ | 0.51 | | | $ | 0.44 | |
| Diluted | | | 0.04 | | | | 0.34 | | | | 0.47 | | | | 0.50 | | | | 0.44 | |
| Core operating earnings (2) | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 0.04 | | | | 0.36 | | | | 0.54 | | | | 0.51 | | | | 0.44 | |
| Diluted | | | 0.04 | | | | 0.36 | | | | 0.54 | | | | 0.50 | | | | 0.44 | |
| Dividends | | | 0.26 | | | | 0.26 | | | | 0.26 | | | | 0.26 | | | | 0.25 | |
| Market Value: | | | | | | | | | | | | | | | | | | | | |
| High | | $ | 17.66 | | | $ | 20.00 | | | $ | 22.51 | | | $ | 26.93 | | | $ | 29.64 | |
| Low | | | 10.00 | | | | 15.90 | | | | 17.30 | | | | 20.58 | | | | 23.99 | |
| Close | | | 11.01 | | | | 16.01 | | | | 18.35 | | | | 22.02 | | | | 27.00 | |
| Book Value | | | 23.37 | | | | 23.93 | | | | 24.01 | | | | 23.51 | | | | 23.21 | |
| Shares outstanding, end of period (in thousands) | | | 8,117 | | | | 8,118 | | | | 8,114 | | | | 7,059 | | | | 7,095 | |
| Performance Ratios (annualized) | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest margin (1) | | | 3.81 | % | | | 3.92 | % | | | 3.76 | % | | | 3.52 | % | | | 3.47 | % |
| Return on average assets -GAAP | | | 0.07 | % | | | 0.58 | % | | | 0.84 | % | | | 0.89 | % | | | 0.80 | % |
| Return on average assets -Core Operating | | | 0.07 | % | | | 0.62 | % | | | 0.95 | % | | | 0.89 | % | | | 0.80 | % |
| Return on average equity- GAAP | | | 0.66 | % | | | 5.62 | % | | | 8.01 | % | | | 8.52 | % | | | 7.53 | % |
| Return on average equity- Core Operating | | | 0.69 | % | | | 5.97 | % | | | 9.15 | % | | | 8.52 | % | | | 7.53 | % |
| Efficiency ratio (3) -GAAP | | | 66.84 | % | | | 67.33 | % | | | 67.75 | % | | | 67.63 | % | | | 69.16 | % |
| Efficiency ratio (3) -Core Operating | | | 66.75 | % | | | 66.19 | % | | | 63.98 | % | | | 67.63 | % | | | 69.16 | % |
| Effective tax rate | | | 12.02 | % | | | 33.03 | % | | | 32.59 | % | | | 29.29 | % | | | 32.62 | % |
| Dividend payout ratio (basic) | | | 650.00 | % | | | 76.47 | % | | | 54.17 | % | | | 50.98 | % | | | 56.82 | % |
| (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) See Non-GAAP Disclosure Reconciliation | | | | | |
| (3) Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains, net and asset sales gains, net. |
| | | | | | | | | | | | | | | | |
| Selected Quarterly Information | | | | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (dollars in thousands, except per share data) | | 3rd Qtr 2008 | | | 2nd Qtr 2008 | | | 1st Qtr 2008 | | | 4th Qtr 2007 | | | 3rd Qtr 2007 | |
| Loan Portfolio Composition | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 250,244 | | | $ | 251,887 | | | $ | 262,710 | | | $ | 229,588 | | | $ | 230,075 | |
| Construction | | | 75,822 | | | | 83,279 | | | | 66,283 | | | | 56,698 | | | | 15,392 | |
| Commercial real estate | | | 746,676 | | | | 731,472 | | | | 706,442 | | | | 580,621 | | | | 592,914 | |
| Commercial | | | 353,453 | | | | 351,812 | | | | 332,772 | | | | 283,072 | | | | 267,897 | |
| Consumer finance | | | 41,964 | | | | 41,251 | | | | 41,209 | | | | 37,743 | | | | 38,280 | |
| Home equity and improvement | | | 158,992 | | | | 153,715 | | | | 151,563 | | | | 128,080 | | | | 127,641 | |
| Total loans | | | 1,627,151 | | | | 1,613,416 | | | | 1,560,979 | | | | 1,315,802 | | | | 1,272,199 | |
| Less: | | | | | | | | | | | | | | | | | | | | |
| Loans in process | | | 29,794 | | | | 29,585 | | | | 24,581 | | | | 25,074 | | | | 6,301 | |
| Deferred loan origination fees | | | 1,030 | | | | 1,080 | | | | 1,044 | | | | 1,032 | | | | 1,026 | |
| Allowance for loan loss | | | 23,445 | | | | 20,578 | | | | 18,556 | | | | 13,890 | | | | 13,427 | |
| Net Loans | | $ | 1,572,882 | | | $ | 1,562,173 | | | $ | 1,516,798 | | | $ | 1,275,806 | | | $ | 1,251,445 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan loss activity | | | | | | | | | | | | | | | | | | | | |
| Beginning allowance | | $ | 20,578 | | | $ | 18,556 | | | $ | 13,890 | | | $ | 13,427 | | | $ | 13,417 | |
| Provision for loan losses | | | 4,907 | | | | 2,797 | | | | 1,058 | | | | 603 | | | | 671 | |
| Reserve from acquisitions | | | 121 | | | | 38 | | | | 4,099 | | | | - | | | | - | |
| Credit loss charge-offs: | | | | | | | | | | | | | | | | | | | | |
| One to four family residential real estate | | | 478 | | | | 281 | | | | 57 | | | | 33 | | | | 128 | |
| Commercial real estate | | | 1,495 | | | | 319 | | | | 464 | | | | 135 | | | | 586 | |
| Commercial | | | | | | | 220 | | | | - | | | | 7 | | | | - | |
| Consumer finance | | | 73 | | | | 56 | | | | 27 | | | | 42 | | | | 25 | |
| Home equity and improvement | | | 216 | | | | 18 | | | | 72 | | | | 30 | | | | 10 | |
| Total charge-offs | | | 2,262 | | | | 894 | | | | 620 | | | | 247 | | | | 749 | |
| Total recoveries | | | 101 | | | | 81 | | | | 129 | | | | 107 | | | | 88 | |
| Net charge-offs (recoveries) | | | 2,161 | | | | 813 | | | | 491 | | | | 140 | | | | 661 | |
| Ending allowance | | $ | 23,445 | | | $ | 20,578 | | | $ | 18,556 | | | $ | 13,890 | | | $ | 13,427 | |
| | | | | | | | | | | | | | | | | | | | | |
| Credit Quality | | | | | | | | | | | | | | | | | | | | |
| Non-accrual loans | | $ | 24,630 | | | $ | 17,727 | | | $ | 13,497 | | | $ | 9,217 | | | $ | 8,523 | |
| Restructured loans, accruing | | | 905 | | | | - | | | | - | | | | - | | | | - | |
| Total non-performing loans (2) | | | 25,535 | | | | 17,727 | | | | 13,497 | | | | 9,217 | | | | 8,523 | |
| Real estate owned (REO) | | | 4,776 | | | | 3,158 | | | | 3,448 | | | | 2,460 | | | | 3,392 | |
| Total non-performing assets (2) | | $ | 30,311 | | | $ | 20,885 | | | $ | 16,945 | | | $ | 11,677 | | | $ | 11,915 | |
| Net charge-offs | | | 2,161 | | | | 813 | | | | 491 | | | | 140 | | | | 661 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses / loans | | | 1.47 | % | | | 1.30 | % | | | 1.21 | % | | | 1.08 | % | | | 1.06 | % |
| Allowance for loan losses / non-performing assets | | | 77.35 | % | | | 98.53 | % | | | 109.51 | % | | | 118.95 | % | | | 112.69 | % |
| Allowance for loan losses / non-performing loans | | | 91.82 | % | | | 116.08 | % | | | 137.48 | % | | | 150.70 | % | | | 157.54 | % |
| Non-performing assets / loans plus REO | | | 1.89 | % | | | 1.32 | % | | | 1.10 | % | | | 0.90 | % | | | 0.94 | % |
| Non-performing assets / total assets | | | 1.58 | % | | | 1.08 | % | | | 0.90 | % | | | 0.73 | % | | | 0.75 | % |
| Net charge-offs / average loans (annualized) | | | 0.55 | % | | | 0.21 | % | | | 0.15 | % | | | 0.04 | % | | | 0.21 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Deposit Balances | | | | | | | | | | | | | | | | | | | | |
| Non-interest-bearing demand deposits | | $ | 158,139 | | | $ | 181,034 | | | $ | 168,049 | | | $ | 121,563 | | | $ | 109,128 | |
| Interest-bearing demand deposits and money market | | | 365,251 | | | | 401,401 | | | | 408,979 | | | | 342,367 | | | | 330,168 | |
| Savings deposits | | | 145,019 | | | | 146,697 | | | | 144,184 | | | | 105,873 | | | | 98,719 | |
| Retail time deposits less than $100,000 | | | 557,643 | | | | 514,209 | | | | 529,990 | | | | 509,720 | | | | 524,347 | |
| Retail time deposits greater than $100,000 | | | 177,848 | | | | 163,614 | | | | 162,400 | | | | 137,927 | | | | 142,645 | |
| National/Brokered time deposits | | | 31,904 | | | | 20,186 | | | | 99 | | | | 408 | | | | 3,157 | |
| Total deposits | | $ | 1,435,804 | | | $ | 1,427,141 | | | $ | 1,413,701 | | | $ | 1,217,858 | | | $ | 1,208,164 | |
| (1) Construction loans to commercial loan customers were included in commercial real estate loans prior to December 31, 2007. |
| (2) Non-performing loans consist of non-accrual loans that are contractually past due 90 days or more and loans that are deemed impaired under the criteria of FASB Statement No. 114. Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof. |
| | | | | | | | | | | | | | | | |
| Loan Delinquency Information | | | | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (dollars in thousands) | | Total Balance | | | Current | | | 30 to 89 days
past due | | | 90+ days
past due (1) | | | Troubled Debt
Restructuring | |
| | | | | | | | | | | | | | | | |
| September 30, 2008 | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 250,244 | | | $ | 240,791 | | | $ | 4,053 | | | $ | 5,400 | | | $ | 902 | |
| Construction | | | 75,822 | | | | 74,232 | | | | 101 | | | | 1,489 | | | | - | |
| Commercial real estate | | | 746,676 | | | | 726,013 | | | | 6,914 | | | | 13,749 | | | | - | |
| Commercial | | | 353,453 | | | | 348,507 | | | | 1,371 | | | | 3,575 | | | | 3 | |
| Consumer finance | | | 41,964 | | | | 41,341 | | | | 473 | | | | 150 | | | | - | |
| Home equity and improvement | | | 158,992 | | | | 156,645 | | | | 2,080 | | | | 267 | | | | - | |
| Total loans | | $ | 1,627,151 | | | $ | 1,587,529 | | | $ | 14,992 | | | $ | 24,630 | | | $ | 905 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| June 30, 2008 | | | | | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 251,887 | | | $ | 243,444 | | | $ | 2,870 | | | $ | 5,573 | | | $ | - | |
| Construction | | | 83,279 | | | | 80,372 | | | | 1,766 | | | | 1,141 | | | | - | |
| Commercial real estate | | | 731,472 | | | | 710,980 | | | | 11,230 | | | | 9,262 | | | | - | |
| Commercial | | | 351,812 | | | | 347,020 | | | | 3,899 | | | | 893 | | | | - | |
| Consumer finance | | | 41,251 | | | | 40,714 | | | | 352 | | | | 185 | | | | - | |
| Home equity and improvement | | | 153,715 | | | | 151,217 | | | | 1,825 | | | | 673 | | | | - | |
| Total loans | | $ | 1,613,416 | | | $ | 1,573,747 | | | $ | 21,942 | | | $ | 17,727 | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| December 31, 2007 | | | | | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 229,588 | | | $ | 226,264 | | | $ | 1,751 | | | $ | 1,573 | | | $ | - | |
| Construction | | | 56,698 | | | | 56,432 | | | | - | | | | 266 | | | | - | |
| Commercial real estate | | | 580,621 | | | | 569,814 | | | | 4,819 | | | | 5,988 | | | | - | |
| Commercial | | | 283,072 | | | | 281,805 | | | | 592 | | | | 675 | | | | - | |
| Consumer finance | | | 37,743 | | | | 37,448 | | | | 276 | | | | 19 | | | | - | |
| Home equity and improvement | | | 128,080 | | | | 125,969 | | | | 1,415 | | | | 696 | | | | - | |
| Total loans | | $ | 1,315,802 | | | $ | 1,297,732 | | | $ | 8,853 | | | $ | 9,217 | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| September 30, 2007 | | | | | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 230,075 | | | $ | 227,097 | | | $ | 1,953 | | | $ | 1,025 | | | $ | - | |
| Construction | | | 15,392 | | | | 14,928 | | | | 198 | | | | 266 | | | | - | |
| Commercial real estate | | | 592,914 | | | | 583,006 | | | | 4,102 | | | | 5,806 | | | | - | |
| Commercial | | | 267,897 | | | | 266,438 | | | | 743 | | | | 716 | | | | - | |
| Consumer finance | | | 38,280 | | | | 38,034 | | | | 213 | | | | 33 | | | | - | |
| Home equity and improvement | | | 127,641 | | | | 124,951 | | | | 2,013 | | | | 677 | | | | - | |
| Total loans | | $ | 1,272,199 | | | $ | 1,254,454 | | | $ | 9,222 | | | $ | 8,523 | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) All loans 90+ days past due are non accrual | | | | | | | | | | | | | | | | | |
13
