Exhibit 99
 | NEWS RELEASE |
| | | |
| | Contact: | William J. Small |
| | | Chairman, President and CEO |
| | | (419) 782-5015 |
| | | bsmall@first-fed.com |
For Immediate Release
FIRST DEFIANCE ANNOUNCES 2008
FOURTH QUARTER AND FULL YEAR EARNINGS
| | · | Net Income of $880,000 or $0.09 per common share for 2008 fourth quarter |
| | · | Provision for Loan Losses of $3.8 million reflects difficult credit environment |
| | · | Mortgage Servicing Rights Impairment of $2.7 million |
| | · | Other-Than-Temporary Impairment of $599,000 recognized on certain investment securities |
| | · | Net Interest Income increased by $3.5 million or 28% over 2007 fourth quarter |
| | · | Net Interest Margin up 20 basis points from 2007 fourth quarter |
DEFIANCE, OHIO (January 19, 2009) – First Defiance Financial Corp. (NASDAQ: FDEF) today announced that net income for the fiscal year ended December 31, 2008 totaled $7.4 million, or $0.91 per diluted common share compared to $13.9 million or $1.94 per diluted common share for the year ended December 31, 2007. The 2008 results included $1.1 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 $8.1 million, or $1.00 per diluted common share for the year ended December 31, 2008. For the fourth quarter ended December 31, 2008, First Defiance earned $880,000 or $.09 per diluted common share compared to $3.6 million, or $0.50 per diluted common share for the fourth quarter of 2007.
“The year of 2008 was an uphill battle and the hill definitely got steeper in the fourth quarter,” said William J. Small, Chairman, President and CEO of First Defiance. “The unprecedented economic and financial issues are reflected in these results. Credit quality continues to be very challenging as layoffs and business closings increase. In addition, impairment charges in the investment portfolio and to mortgage serving rights are negatively impacting many banks. However, even in this environment, we were profitable in 2008 and continue to have confidence in our core operation, our community bank focus and our strong capital levels.”
Credit Quality
The 2008 fourth quarter results include expense for provision for loan losses of $3.8 million, compared with just $603,000 in the same period in 2007.
Non-performing loans totaled $34.3 million at December 31, 2008, an increase from $25.5 million at September 30, 2008. The December 31, 2008 balance included $28 million of loans that are 90 days past due and another $6.3 million of loans considered non-performing because of changes in terms granted to borrowers but which are still accruing interest. In addition, First Defiance had $7 million of Real Estate Owned at December 31, 2008. For the 2008 fourth quarter, First Defiance recorded charge-offs of $2.7 million, which represented .67% of average loans outstanding (annualized).
“The economic challenges of the country and our market area continue to be reflected in our quarterly results,” said Mr. Small. “We recorded a provision for loan losses of $3.8 million, due primarily to the deterioration of a number of large credits in our commercial portfolio. Our underwriting standards are sound but we now have situations where established customers are struggling to make their payments. 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, resulting in additional write downs. We are proactively working to identify all potential problems and mitigate our losses as much as possible.”
Mortgage Servicing Impairment Impacts Results
Results for the fourth quarter of 2008 were significantly impacted by a $2.7 million impairment of Mortgage Servicing Rights (MSRs) compared with a $38,000 impairment charge in the fourth quarter of 2007. At December 31, 2008, First Defiance serviced $1.1 billion in loans for others. The MSRs for those loans had a fair value of $6.6 million or 0.60% of the outstanding balance serviced at December 31, 2008. Total impairment reserves, which are available for recapture in the future, totaled $2.8 million at December 31, 2008.
Margin Improved by 20 Basis Points
“Despite the continued decline in overall market rates our net interest margin was strong at 3.72% for the quarter,” said Mr. Small. “This was a 20 basis point improvement over last year’s fourth quarter, although a decline of 9 basis points from the third quarter of 2008 level of 3.81%.”
Net interest margin improvement was driven by a 134 basis point decline in interest-bearing liabilities to 2.56% in the 2008 fourth quarter compared to 3.90% for the same period in 2007. That decline more than offset a 103 basis point drop in yields on interest-earning assets. The Pavilion acquisition and substantial growth in non-interest bearing liabilities contributed to the improvement. At December 31, 2008, non-interest bearing deposits were 12.0% of total deposits, compared to 10.0% at December 31, 2007.
“Despite the improvement over last year’s fourth quarter, we are seeing pressure on our net interest margin,” noted Mr. Small. “Both our yield on earnings assets and our average loan rates are down 18 basis points from this year’s third quarter, while deposit costs are only down 9 basis points. As a result, the overall margin slipped from 3.81% to 3.72% from the third quarter to the fourth quarter. With the historic cut in the Fed Funds rate last month, I think we’ll continue to experience downward pressure on our margin going into 2009.”
Investment Portfolio
The $599,000 Other-Than-Temporary Impairment (OTTI) charge recognized by First Defiance in the fourth quarter related to three Trust Preferred Collateralized Debt Obligations
(CDOs) investments with an original cost of $2.0 million which have been written down to a value of $419,000. The company recorded an OTTI charge of $489,000 on one CDO investment that had an original cost of $1.0 million and recorded an additional OTTI charge of $110,000 on two equity notes of Trust Preferred CDOs in the 2008 fourth quarter. At December 31, 2008, the value of those equity note CDOs, which had a total original cost of $1.0 million, had been written down to $50,000.
First Defiance has other Trust Preferred CDO investments with a total cost of $7.6 million and market values of $3.5 million at December 31, 2008. The decline in value of those investments is primarily due to the overall lack of liquidity in the CDO market although 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.
The fourth quarter results were also impacted by a $577,000 write down of the cash value on a portion of the investments within the Bank-Owned-Life-Insurance (BOLI) portfolio. The total investment in BOLI at 2008 year end was $28.7 million.
Non-Interest Income
Total non interest income declined to $2.8 million in the fourth quarter of 2008 from $5.3 million in the fourth quarter of 2007.Service fees increased 26% or $722,000 in the fourth quarter of 2008 over the same period in 2007. Mortgage banking income declined $1.5 million compared to the fourth quarter of 2007 driven by a $2.7 million impairment charge on MSRs partially offset by an increase of $989,000 in gain on sale of mortgage loans. Loss on securities was $596,000 in the fourth quarter of 2008.
Non-Interest Expenses Year over Year Rise Due to Acquisition
Total non-interest expense increased to $13.6 million for the quarter ended December 31, 2008 compared to $12.2 million in the fourth quarter of 2007 and $15.2 million for the third quarter of 2008. Year over year increases across the board are generally attributable to the Pavilion acquisition, which closed late in the 2008 first quarter. The efficiency ratio for the 2008 fourth quarter was 69.25% compared to 67.63% in the fourth quarter of 2007.
Annual Results
Earnings for 2008 were $7.4 million, a decline of $6.5 million or 47% from 2007. Net interest income for 2008 totaled $62.2 million, a $13.5 million or 28% increase over 2007. Average interest-earning assets increased to $1.7 billion for 2008 compared to $1.4 billion in 2007. Net interest margin for 2008 was 3.80%, up 25 basis points from the 3.55% margin for the year ended December 31, 2007. The provision for loan losses for 2008 was $12.6 million, compared to $2.3 million in 2007.
Non-interest income for the 12-month period ended December 31, 2008 was $19.1 million compared to $22.1 million during the same period of 2007. The 2008 results include securities losses of $3.2 million recognized year-to-date for OTTI charges recognized for impaired investment securities. Service fees and other charges were $13.3 million for the year compared to $10.8 million for 2007, an increase of 23%. Mortgage banking income decreased by
$622,000 due to impairment charges of $2.7 million in 2008 and insurance commission income increased by $218,000 to $5.5 million in 2008.
Non-interest expense increased to $57.8 million for the full year of 2008 from $48.1 million in 2007. Excluding one-time acquisition-related charges of $1.1 million, 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 $947,000 due to changes in the assessment rates and full utilization of credits issued by the FDIC in the 2008 first quarter. Non-interest expense for 2008 also includes $727,000 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 $1.96 Billion
Total assets at December 31, 2008 were $1.96 billion, compared to $1.61 billion at December 31, 2007. Net loans receivable (excluding loans held for sale) were $1.59 billion at December 31, 2008 compared to $1.28 billion at December 31, 2007. Total deposits at December 31, 2008 were $1.47 billion compared to $1.22 billion at December 31, 2007. Non-interest bearing deposits at December 31, 2008 were $176.1 million compared to $121.6 million at December 31, 2007. Total stockholders’ equity was $229 million at December 31, 2008 compared to $166 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 December 31, 2008, goodwill and other intangible assets totaled $64.9 million compared to $40.4 million at December 31, 2007. The balance sheet changes are primarily attributable to the Pavilion acquisition.
Capital
First Defiance elected in the fourth quarter to receive $37 million of equity capital by issuing to the U.S. Department of Treasury 37,000 shares of Fixed Rate Cumulative Perpetual Preferred Series A Stock.
"First Defiance has proven that it is well positioned to continue its role as a leader in banking throughout our market area. We've been a leading lender to growing businesses in our region and we're looking forward to utilizing this capital to further expand our business and support the communities we serve,” said Small.
The Series A stock has a liquidation preference of $1,000 per share. The U.S. Treasury was also issued a 10-year warrant to purchase up to 550,595 shares of First Defiance Common Stock at an exercise price of $10.08 per share.
Impact of Recent Developments
“It would be nice to think all of the challenges we faced in 2008 are behind us as we move into 2009, but we all know there are many challenges ahead,” said Mr. Small. “2008 saw the continued decline in the housing market with additional foreclosures, bank failures, and unprecedented government intervention. But, even in this extremely difficult setting, I believe there is great opportunity for community banks like ours. We remain well capitalized with a proven operating strategy and as we move forward we will pursue opportunities to continue to grow even in this economic environment.”
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, January 20, 2009 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 conference call Webcast will be available at www.fdef.com until Tuesday, February 3, 2009. To receive a copy of the transcript, please call First Defiance Investor Relations at 419-782-5015.
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.
Safe Harbor Statement
This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell 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) | | | | |
| | | | | | | |
| | | December 31, | | | December 31, | |
| (in thousands) | | 2008 | | | 2007 | |
| | | | | | | |
| Assets | | | | | | |
| Cash and cash equivalents | | | | | | |
| Cash and amounts due from depository institutions | | $ | 40,980 | | | $ | 53,976 | |
| Interest-bearing deposits | | | 5,172 | | | | 11,577 | |
| | | | 46,152 | | | | 65,553 | |
| Securities | | | | | | | | |
| Available-for sale, carried at fair value | | | 117,575 | | | | 112,370 | |
| Held-to-maturity, carried at amortized cost | | | 886 | | | | 1,117 | |
| | | | 118,461 | | | | 113,487 | |
| | | | | | | | | |
| Loans | | | 1,617,235 | | | | 1,289,696 | |
| Allowance for loan losses | | | (24,592 | ) | | | (13,890 | ) |
| Loans, net | | | 1,592,643 | | | | 1,275,806 | |
| Loans held for sale | | | 10,960 | | | | 5,751 | |
| Mortgage servicing rights | | | 6,611 | | | | 5,973 | |
| Accrued interest receivable | | | 7,293 | | | | 6,755 | |
| Federal Home Loan Bank stock | | | 21,376 | | | | 18,586 | |
| Bank Owned Life Insurance | | | 28,747 | | | | 28,423 | |
| Office properties and equipment | | | 47,756 | | | | 40,545 | |
| Real estate and other assets held for sale | | | 7,000 | | | | 2,460 | |
| Goodwill | | | 56,585 | | | | 36,820 | |
| Core deposit and other intangibles | | | 8,344 | | | | 3,551 | |
| Other assets | | | 5,249 | | | | 5,694 | |
| Total Assets | | $ | 1,957,177 | | | $ | 1,609,404 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
| Non-interest-bearing deposits | | $ | 176,063 | | | $ | 121,563 | |
| Interest-bearing deposits | | | 1,293,849 | | | | 1,096,295 | |
| Total deposits | | | 1,469,912 | | | | 1,217,858 | |
| Advances from Federal Home Loan Bank | | | 156,067 | | | | 139,536 | |
| Notes payable and other interest-bearing liabilities | | | 49,454 | | | | 30,055 | |
| Subordinated debentures | | | 36,083 | | | | 36,083 | |
| Advance payments by borrowers for tax and insurance | | | 652 | | | | 762 | |
| Deferred taxes | | | 2,811 | | | | 1,306 | |
| Other liabilities | | | 13,039 | | | | 17,850 | |
| Total liabilities | | | 1,728,018 | | | | 1,443,450 | |
| Stockholders’ Equity | | | | | | | | |
| Preferred stock- including warrants and amortization of discount on preferred shares | | | 37,011 | | | | - | |
| Common stock, net | | | 127 | | | | 117 | |
| Additional paid-in-capital | | | 140,449 | | | | 112,651 | |
| Stock acquired by ESOP | | | - | | | | (202 | ) |
| Accumulated other comprehensive loss | | | (1,904 | ) | | | (415 | ) |
| Retained earnings | | | 126,114 | | | | 126,630 | |
| Treasury stock, at cost | | | (72,638 | ) | | | (72,827 | ) |
| Total stockholders’ equity | | | 229,159 | | | | 165,954 | |
| Total liabilities and stockholders’ equity | | $ | 1,957,177 | | | $ | 1,609,404 | |
| | | | | |
| Consolidated Statements of Income (Unaudited) | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| (in thousands, except per share amounts) | | 2008 | | 2007 | | | 2008 | | 2007 | |
| Interest Income: | | | | | | | | | | | | |
| Loans | | $ | 24,301 | | | $ | 22,984 | | | $ | 96,522 | | | $ | 90,866 | |
| Investment securities | | | 1,375 | | | | 1,447 | | | | 5,756 | | | | 5,735 | |
| Interest-bearing deposits | | | 4 | | | | 438 | | | | 123 | | | | 924 | |
| FHLB stock dividends | | | 265 | | | | 328 | | | | 1,062 | | | | 1,226 | |
| Total interest income | | | 25,945 | | | | 25,197 | | | | 103,463 | | | | 98,751 | |
| Interest Expense: | | | | | | | | | | | | | | | | |
| Deposits | | | 7,503 | | | | 10,227 | | | | 31,354 | | | | 40,356 | |
| FHLB advances and other | | | 1,572 | | | | 1,636 | | | | 6,375 | | | | 6,889 | |
| Subordinated debentures | | | 462 | | | | 596 | | | | 1,907 | | | | 2,115 | |
| Notes Payable | | | 415 | | | | 210 | | | | 1,632 | | | | 729 | |
| Total interest expense | | | 9,952 | | | | 12,669 | | | | 41,268 | | | | 50,089 | |
| Net interest income | | | 15,993 | | | | 12,528 | | | | 62,195 | | | | 48,662 | |
| Provision for loan losses | | | 3,824 | | | | 603 | | | | 12,585 | | | | 2,306 | |
| Net interest income after provision for loan losses | | | 12,169 | | | | 11,925 | | | | 49,610 | | | | 46,356 | |
| Non-interest Income: | | | | | | | | | | | | | | | | |
| Service fees and other charges | | | 3,512 | | | | 2,790 | | | | 13,268 | | | | 10,788 | |
| Mortgage banking income | | | (636 | ) | | | 833 | | | | 2,990 | | | | 3,612 | |
| Gain on sale of non-mortgage loans | | | 3 | | | | 22 | | | | 180 | | | | 226 | |
| Gain/(Loss) on securities | | | (596 | ) | | | - | | | | (3,160 | ) | | | 21 | |
| Insurance and investment sales commissions | | | 1,115 | | | | 1,034 | | | | 5,496 | | | | 5,278 | |
| Trust income | | | 104 | | | | 95 | | | | 448 | | | | 375 | |
| Income from Bank Owned Life Insurance | | | (428 | ) | | | 446 | | | | 323 | | | | 1,375 | |
| Other non-interest income | | | (310 | ) | | | 48 | | | | (476 | ) | | | 455 | |
| Total Non-interest Income | | | 2,764 | | | | 5,268 | | | | 19,069 | | | | 22,130 | |
| Non-interest Expense: | | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 6,408 | | | | 5,897 | | | | 28,829 | | | | 25,245 | |
| Occupancy | | | 1,922 | | | | 1,776 | | | | 7,484 | | | | 6,100 | |
| State franchise tax | | | 411 | | | | 506 | | | | 1,951 | | | | 1,579 | |
| Acquisition related charges | | | 85 | | | | - | | | | 1,117 | | | | - | |
| Data processing | | | 1,274 | | | | 986 | | | | 4,658 | | | | 3,824 | |
| Amortization of intangibles | | | 424 | | | | 165 | | | | 1,459 | | | | 646 | |
| Other non-interest expense | | | 3,047 | | | | 2,831 | | | | 12,296 | | | | 10,719 | |
| Total Non-interest Expense | | | 13,571 | | | | 12,161 | | | | 57,794 | | | | 48,113 | |
| Income before income taxes | | | 1,362 | | | | 5,032 | | | | 10,885 | | | | 20,373 | |
| Income taxes | | | 482 | | | | 1,474 | | | | 3,528 | | | | 6,469 | |
| Net Income | | $ | 880 | | | $ | 3,558 | | | $ | 7,357 | | | $ | 13,904 | |
| | | | | | | | | | | | | | | | | |
| Dividends Declared on Preferred Shares | | $ | (145 | ) | | $ | - | | | $ | (145 | ) | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Net Income Applicable to Common Shares | | $ | 735 | | | $ | 3,558 | | | $ | 7,212 | | | $ | 13,904 | |
| | | | | | | | | | | | | | | | | |
| Earnings per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.09 | | | $ | 0.51 | | | $ | 0.91 | | | $ | 1.96 | |
| Diluted | | $ | 0.09 | | | $ | 0.50 | | | $ | 0.91 | | | $ | 1.94 | |
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| Core operating earnings per common share*: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.10 | | | $ | 0.51 | | | $ | 1.00 | | | $ | 1.96 | |
| Diluted | | $ | 0.10 | | | $ | 0.50 | | | $ | 1.00 | | | $ | 1.94 | |
| | | | | | | | | | | | | | | | | |
| Average Shares Outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 8,117 | | | | 7,037 | | | | 7,911 | | | | 7,085 | |
| Diluted | | | 8,117 | | | | 7,108 | | | | 7,911 | | | | 7,178 | |
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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 | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| (dollars in thousands, except per share data) | | 2008 | | | 2007 | | | % change | | | 2008 | | | 2007 | | | % change | |
| Summary of Operations | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Tax-equivalent interest income (1) | | | 26,188 | | | | 25,383 | | | | 3.2 | | | | 104,360 | | | | 99,477 | | | | 4.9 | |
| Interest expense | | | 9,952 | | | | 12,669 | | | | (21.4 | ) | | | 41,268 | | | | 50,089 | | | | (17.6 | ) |
| Tax-equivalent net interest income (1) | | | 16,236 | | | | 12,714 | | | | 27.7 | | | | 63,092 | | | | 49,388 | | | | 27.7 | |
| Provision for loan losses | | | 3,824 | | | | 603 | | | | 534.2 | | | | 12,585 | | | | 2,306 | | | | 445.8 | |
| Tax-equivalent NII after provision for loan loss (1) | | | 12,412 | | | | 12,111 | | | | 2.5 | | | | 50,507 | | | | 47,082 | | | | 7.3 | |
| Securities losses | | | (596 | ) | | | - | | | NM | | | | (3,160 | ) | | | 21 | | | NM | |
| Non-interest income-excluding securities losses | | | 3,360 | | | | 5,268 | | | | (36.2 | ) | | | 22,229 | | | | 22,109 | | | | 0.5 | |
| Non-interest expense | | | 13,571 | | | | 12,161 | | | | 11.6 | | | | 57,794 | | | | 48,113 | | | | 20.1 | |
| Non-interest expense-excluding non-core charges | | | 13,486 | | | | 12,161 | | | | 10.9 | | | | 56,677 | | | | 48,113 | | | | 17.8 | |
| One time acquisition related charges | | | 85 | | | | - | | | NM | | | | 1,117 | | | | - | | | NM | |
| Income taxes | | | 482 | | | | 1,474 | | | | (67.3 | ) | | | 3,528 | | | | 6,469 | | | | (45.5 | ) |
| Net Income | | | 880 | | | | 3,558 | | | | (75.3 | ) | | | 7,357 | | | | 13,904 | | | | (47.1 | ) |
| Core operating earnings (2) | | | 935 | | | | 3,558 | | | | (73.7 | ) | | | 8,083 | | | | 13,904 | | | | (41.9 | ) |
| Tax equivalent adjustment (1) | | | 243 | | | | 186 | | | | 30.6 | | | | 897 | | | | 726 | | | | 23.6 | |
| At Period End | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | | | 1,957,177 | | | | 1,609,404 | | | | 21.6 | | | | | | | | | | | | | |
| Earning assets | | | 1,773,204 | | | | 1,439,097 | | | | 23.2 | | | | | | | | | | | | | |
| Loans | | | 1,617,235 | | | | 1,289,696 | | | | 25.4 | | | | | | | | | | | | | |
| Allowance for loan losses | | | 24,592 | | | | 13,890 | | | | 77.0 | | | | | | | | | | | | | |
| Deposits | | | 1,469,912 | | | | 1,217,858 | | | | 20.7 | | | | | | | | | | | | | |
| Stockholders’ equity | | | 229,159 | | | | 165,954 | | | | 38.1 | | | | | | | | | | | | | |
| Average Balances | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | | | 1,938,461 | | | | 1,589,264 | | | | 22.0 | | | | 1,852,345 | | | | 1,544,369 | | | | 19.9 | |
| Earning assets | | | 1,730,284 | | | | 1,432,061 | | | | 20.8 | | | | 1,655,725 | | | | 1,391,140 | | | | 19.0 | |
| Deposits and interest-bearing liabilities | | | 1,718,315 | | | | 1,404,065 | | | | 22.4 | | | | 1,638,426 | | | | 1,361,920 | | | | 20.3 | |
| Loans | | | 1,591,144 | | | | 1,265,307 | | | | 25.8 | | | | 1,511,877 | | | | 1,241,817 | | | | 21.7 | |
| Deposits | | | 1,466,366 | | | | 1,212,486 | | | | 20.9 | | | | 1,390,815 | | | | 1,169,160 | | | | 19.0 | |
| Stockholders’ equity | | | 201,499 | | | | 165,762 | | | | 21.6 | | | | 190,872 | | | | 164,058 | | | | 16.3 | |
| Stockholders’ equity / assets | | | 10.39 | % | | | 10.43 | % | | | (0.3 | ) | | | 10.30 | % | | | 10.62 | % | | | (3.0 | ) |
| Per Common Share Data | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Income | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.09 | | | $ | 0.51 | | | | (82.4 | ) | | $ | 0.91 | | | $ | 1.96 | | | | (53.6 | ) |
| Diluted | | | 0.09 | | | | 0.50 | | | | (82.0 | ) | | | 0.91 | | | | 1.94 | | | | (53.1 | ) |
| Core operating earnings (2) | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.10 | | | $ | 0.51 | | | | (80.8 | ) | | $ | 1.00 | | | $ | 1.96 | | | | (48.9 | ) |
| Diluted | | | 0.10 | | | | 0.50 | | | | (80.6 | ) | | | 1.00 | | | | 1.94 | | | | (48.2 | ) |
| Dividends | | | 0.17 | | | | 0.26 | | | | (34.6 | ) | | | 0.95 | | | | 1.01 | | | | (5.9 | ) |
| Market Value: | | | | | | | | | | | | | | | | | | | | | | | | |
| High | | $ | 14.50 | | | $ | 26.93 | | | | (46.2 | ) | | $ | 22.51 | | | $ | 30.25 | | | | (25.6 | ) |
| Low | | | 6.00 | | | | 20.58 | | | | (70.8 | ) | | | 6.00 | | | | 20.58 | | | | (70.8 | ) |
| Close | | | 7.73 | | | | 22.02 | | | | (64.9 | ) | | | 7.73 | | | | 22.02 | | | | (64.9 | ) |
| Book Value | | | 23.67 | | | | 23.51 | | | | 0.7 | | | | 23.67 | | | | 23.51 | | | | 0.7 | |
| Tangible Book Value | | | 15.67 | | | | 17.79 | | | | (11.9 | ) | | | 15.67 | | | | 17.79 | | | | (11.9 | ) |
| Shares outstanding, end of period (000) | | | 8,117 | | | | 7,059 | | | | 15.0 | | | | 8,117 | | | | 7,059 | | | | 15.0 | |
| Performance Ratios (annualized) | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest margin (1) | | | 3.72 | % | | | 3.52 | % | | | 5.6 | | | | 3.80 | % | | | 3.55 | % | | | 7.2 | |
| Return on average assets -GAAP | | | 0.18 | % | | | 0.89 | % | | | (79.7 | ) | | | 0.40 | % | | | 0.90 | % | | | (55.9 | ) |
| Return on average assets -Core Operating | | | 0.19 | % | | | 0.89 | % | | | (78.4 | ) | | | 0.44 | % | | | 0.90 | % | | | (51.5 | ) |
| Return on average equity- GAAP | | | 1.74 | % | | | 8.52 | % | | | (79.6 | ) | | | 3.85 | % | | | 8.48 | % | | | (54.5 | ) |
| Return on average equity- Core Operating | | | 1.85 | % | | | 8.52 | % | | | (78.3 | ) | | | 4.23 | % | | | 8.48 | % | | | (50.1 | ) |
| Efficiency ratio (3) -GAAP | | | 69.25 | % | | | 67.63 | % | | | 2.4 | | | | 67.74 | % | | | 67.29 | % | | | 0.7 | |
| Efficiency ratio (3) -Core Operating | | | 68.82 | % | | | 67.63 | % | | | 1.8 | | | | 66.43 | % | | | 67.29 | % | | | (1.3 | ) |
| Effective tax rate | | | 35.39 | % | | | 29.29 | % | | | 20.8 | | | | 32.41 | % | | | 31.75 | % | | | 2.1 | |
| Dividend payout ratio (basic) | | | 188.89 | % | | | 50.98 | % | | NM | | | | 104.40 | % | | | 51.53 | % | | | 102.6 | |
| (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 | | | Twelve Months Ended | |
| Core Operating Earnings | | December 31, | | | December 31, | |
| (dollars in thousands, except per share data) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Net Income | | $ | 880 | | | $ | 3,558 | | | $ | 7,357 | | | $ | 13,904 | |
| | | | | | | | | | | | | | | | | |
| Acquisition related charges | | | 85 | | | | - | | | | 1,117 | | | | - | |
| Tax effect | | | (30 | ) | | | - | | | | (391 | ) | | | - | |
| After-tax non-operating items | | | 55 | | | | - | | | | 726 | | | | - | |
| Core operating earnings | | $ | 935 | | | $ | 3,558 | | | $ | 8,083 | | | $ | 13,904 | |
| 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 | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| (dollars in thousands) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | | | | | | | | | | | |
| Gain from sale of mortgage loans | | $ | 1,587 | | | $ | 598 | | | $ | 4,395 | | | $ | 2,590 | |
| Mortgage loan servicing revenue (expense): | | | | | | | | | | | | | | | | |
| Mortgage loan servicing revenue | | | 698 | | | | 440 | | | | 2,537 | | | | 1,706 | |
| Amortization of mortgage servicing rights | | | (258 | ) | | | (167 | ) | | | (1,266 | ) | | | (648 | ) |
| Mortgage servicing rights valuation adjustments | | | (2,663 | ) | | | (38 | ) | | | (2,676 | ) | | | (36 | ) |
| | | | (2,223 | ) | | | 235 | | | | (1,405 | ) | | | 1,022 | |
| Total revenue from sale and servicing of mortgage loans | | $ | (636 | ) | | $ | 833 | | | $ | 2,990 | | | $ | 3,612 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Yield Analysis | | | | | | | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | |
| | | 2008 | | | 2007 | |
| | | Average | | | | | | Yield | | | Average | | | | | | Yield | |
| | | Balance | | | Interest(1) | | | Rate(2) | | | Balance | | | Interest(1) | | | Rate(2) | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 1,591,144 | | | $ | 24,329 | | | | 6.08 | % | | $ | 1,265,307 | | | $ | 22,997 | | | | 7.21 | % |
| Securities | | | 115,165 | | | | 1,590 | | | | 5.20 | % | | | 112,910 | | | | 1,620 | | | | 5.68 | % |
| Interest Bearing Deposits | | | 2,599 | | | | 4 | | | | 0.61 | % | | | 35,259 | | | | 438 | | | | 4.93 | % |
| FHLB stock | | | 21,376 | | | | 265 | | | | 4.93 | % | | | 18,585 | | | | 328 | | | | 7.00 | % |
| Total interest-earning assets | | | 1,730,284 | | | | 26,188 | | | | 6.00 | % | | | 1,432,061 | | | | 25,383 | | | | 7.03 | % |
| Non-interest-earning assets | | | 208,177 | | | | | | | | | | | | 157,203 | | | | | | | | | |
| Total assets | | $ | 1,938,461 | | | | | | | | | | | $ | 1,589,264 | | | | | | | | | |
| Deposits and Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | $ | 1,293,560 | | | $ | 7,503 | | | | 2.31 | % | | $ | 1,098,408 | | | $ | 10,227 | | | | 3.69 | % |
| FHLB advances and other | | | 155,954 | | | | 1,572 | | | | 4.01 | % | | | 128,677 | | | | 1,636 | | | | 5.04 | % |
| Other Borrowings | | | 59,760 | | | | 415 | | | | 2.76 | % | | | 26,605 | | | | 210 | | | | 3.13 | % |
| Subordinated debentures | | | 36,235 | | | | 462 | | | | 5.07 | % | | | 36,297 | | | | 596 | | | | 6.51 | % |
| Total interest-bearing liabilities | | | 1,545,509 | | | | 9,952 | | | | 2.56 | % | | | 1,289,987 | | | | 12,669 | | | | 3.90 | % |
| Non-interest bearing deposits | | | 172,806 | | | | - | | | | - | | | | 114,078 | | | | - | | | | - | |
| Total including non-interest-bearing demand deposits | | | 1,718,315 | | | | 9,952 | | | | 2.30 | % | | | 1,404,065 | | | | 12,669 | | | | 3.58 | % |
| Other non-interest-bearing liabilities | | | 18,647 | | | | | | | | | | | | 19,437 | | | | | | | | | |
| Total liabilities | | | 1,736,962 | | | | | | | | | | | | 1,423,502 | | | | | | | | | |
| Stockholders' equity | | | 201,499 | | | | | | | | | | | | 165,762 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,938,461 | | | | | | | | | | | $ | 1,589,264 | | | | | | | | | |
| Net interest income; interest rate spread | | | $ | 16,236 | | | | 3.44 | % | | | | | | $ | 12,714 | | | | 3.13 | % |
| Net interest margin (3) | | | | | | | | | | | 3.72 | % | | | | | | | | | | | 3.52 | % |
| Average interest-earning assets to average interest bearing liabilities | | | | 112 | % | | | | | | | | | | | 111 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Twelve Months Ended December 31, | |
| | | 2008 | | | 2007 | |
| | | Average | | | | | | Yield | | | Average | | | | | | Yield | |
| | | Balance | | | Interest(1) | | | Rate(2) | | | Balance | | | Interest(1) | | | Rate(2) | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 1,511,877 | | | $ | 96,627 | | | | 6.39 | % | | $ | 1,241,817 | | | $ | 90,913 | | | | 7.32 | % |
| Securities | | | 117,972 | | | | 6,548 | | | | 5.43 | % | | | 112,577 | | | | 6,414 | | | | 5.68 | % |
| Interest Bearing Deposits | | | 5,383 | | | | 123 | | | | 2.28 | % | | | 18,161 | | | | 924 | | | | 5.09 | % |
| FHLB stock | | | 20,493 | | | | 1,062 | | | | 5.18 | % | | | 18,585 | | | | 1,226 | | | | 6.60 | % |
| Total interest-earning assets | | | 1,655,725 | | | | 104,360 | | | | 6.30 | % | | | 1,391,140 | | | | 99,477 | | | | 7.15 | % |
| Non-interest-earning assets | | | 196,620 | | | | | | | | | | | | 153,229 | | | | | | | | | |
| Total assets | | $ | 1,852,345 | | | | | | | | | | | $ | 1,544,369 | | | | | | | | | |
| Deposits and Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | $ | 1,231,363 | | | $ | 31,354 | | | | 2.55 | % | | $ | 1,064,960 | | | $ | 40,356 | | | | 3.79 | % |
| FHLB advances and other | | | 160,407 | | | | 6,375 | | | | 3.97 | % | | | 136,484 | | | | 6,889 | | | | 5.05 | % |
| Other Borrowings | | | 50,962 | | | | 1,632 | | | | 3.20 | % | | | 23,841 | | | | 729 | | | | 3.06 | % |
| Subordinated debentures | | | 36,242 | | | | 1,907 | | | | 5.26 | % | | | 32,435 | | | | 2,115 | | | | 6.52 | % |
| Total interest-bearing liabilities | | | 1,478,974 | | | | 41,268 | | | | 2.79 | % | | | 1,257,720 | | | | 50,089 | | | | 3.98 | % |
| Non-interest bearing deposits | | | 159,452 | | | | - | | | | - | | | | 104,200 | | | | - | | | | - | |
| Total including non-interest-bearing demand deposits | | | 1,638,426 | | | | 41,268 | | | | 2.52 | % | | | 1,361,920 | | | | 50,089 | | | | 3.68 | % |
| Other non-interest-bearing liabilities | | | 23,047 | | | | | | | | | | | | 18,391 | | | | | | | | | |
| Total liabilities | | | 1,661,473 | | | | | | | | | | | | 1,380,311 | | | | | | | | | |
| Stockholders' equity | | | 190,872 | | | | | | | | | | | | 164,058 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,852,345 | | | | | | | | | | | $ | 1,544,369 | | | | | | | | | |
| Net interest income; interest rate spread | | | $ | 63,092 | | | | 3.51 | % | | | | | | $ | 49,388 | | | | 3.17 | % |
| Net interest margin (3) | | | | | | | | | | | 3.80 | % | | | | | | | | | | | 3.55 | % |
| Average interest-earning assets to average interest bearing liabilities | | | | 112 | % | | | | | | | | | | | 111 | % |
| (1) Interest on certain tax exempt loans and securities is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to |
| taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 35%. |
| (2) Annualized | | | | | | | | | | | |
| (3) Net interest margin is net interest income divided by average interest-earning assets. | | |
| | | | | | | | | | | | | | | | |
| Selected Quarterly Information | | | | | | | | | | | | | | | |
| First Defiance Financial Corp. | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (dollars in thousands, except per share data) | | 4th Qtr 2008 | | | 3rd Qtr 2008 | | | 2nd Qtr 2008 | | | 1st Qtr 2008 | | | 4th Qtr 2007 | |
| Summary of Operations | | | | | | | | | | | | | | | |
| Tax-equivalent interest income (1) | | $ | 26,188 | | | $ | 26,876 | | | $ | 26,453 | | | $ | 24,843 | | | $ | 25,383 | |
| Interest expense | | | 9,952 | | | | 10,277 | | | | 9,991 | | | | 11,048 | | | | 12,669 | |
| Tax-equivalent net interest income (1) | | | 16,236 | | | | 16,599 | | | | 16,462 | | | | 13,795 | | | | 12,714 | |
| Provision for loan losses | | | 3,824 | | | | 4,907 | | | | 2,797 | | | | 1,058 | | | | 603 | |
| Tax-equivalent NII after provision for loan losses (1) | | | 12,412 | | | | 11,692 | | | | 13,665 | | | | 12,737 | | | | 12,111 | |
| Investment securities gains (losses) | | | (596 | ) | | | (2,051 | ) | | | (432 | ) | | | (81 | ) | | | - | |
| Non-interest income (excluding securities gains/losses) | | | 3,360 | | | | 6,191 | | | | 6,582 | | | | 6,096 | | | | 5,268 | |
| Non-interest expense | | | 13,571 | | | | 15,233 | | | | 15,515 | | | | 13,476 | | | | 12,161 | |
| Acquisition and other on-time charges | | | 85 | | | | 20 | | | | 262 | | | | 750 | | | | - | |
| Income taxes | | | 482 | | | | 44 | | | | 1,349 | | | | 1,653 | | | | 1,474 | |
| Net income | | | 880 | | | | 322 | | | | 2,735 | | | | 3,419 | | | | 3,558 | |
| Core operating earnings (2) | | | 935 | | | | 335 | | | | 2,905 | | | | 3,906 | | | | 3,558 | |
| Tax equivalent adjustment (1) | | | 243 | | | | 233 | | | | 216 | | | | 204 | | | | 186 | |
| At Period End | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,957,177 | | | $ | 1,922,026 | | | $ | 1,928,925 | | | $ | 1,886,047 | | | $ | 1,609,404 | |
| Earning assets | | | 1,773,204 | | | | 1,741,438 | | | | 1,736,238 | | | | 1,689,813 | | | | 1,439,097 | |
| Loans | | | 1,617,235 | | | | 1,596,327 | | | | 1,582,751 | | | | 1,535,354 | | | | 1,289,696 | |
| Allowance for loan losses | | | 24,592 | | | | 23,445 | | | | 20,578 | | | | 18,556 | | | | 13,890 | |
| Deposits | | | 1,469,912 | | | | 1,435,804 | | | | 1,427,141 | | | | 1,413,701 | | | | 1,217,858 | |
| Stockholders’ equity | | | 229,159 | | | | 189,676 | | | | 194,280 | | | | 194,780 | | | | 165,954 | |
| Stockholders’ equity / assets | | | 11.71 | % | | | 9.87 | % | | | 10.07 | % | | | 10.33 | % | | | 10.31 | % |
| Goodwill | | | 56,585 | | | | 56,830 | | | | 56,111 | | | | 57,315 | | | | 36,820 | |
| Average Balances | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,938,461 | | | $ | 1,928,987 | | | $ | 1,898,165 | | | $ | 1,645,436 | | | $ | 1,589,264 | |
| Earning assets | | | 1,730,284 | | | | 1,727,343 | | | | 1,689,398 | | | | 1,475,882 | | | | 1,432,061 | |
| Deposits and interest-bearing liabilities | | | 1,718,315 | | | | 1,712,212 | | | | 1,678,026 | | | | 1,445,113 | | | | 1,404,065 | |
| Loans | | | 1,591,144 | | | | 1,585,489 | | | | 1,544,409 | | | | 1,326,468 | | | | 1,265,307 | |
| Deposits | | | 1,466,366 | | | | 1,437,273 | | | | 1,423,266 | | | | 1,236,354 | | | | 1,212,486 | |
| Stockholders’ equity | | | 201,499 | | | | 194,452 | | | | 195,845 | | | | 171,693 | | | | 165,762 | |
| Stockholders’ equity / assets | | | 10.39 | % | | | 10.08 | % | | | 10.32 | % | | | 10.43 | % | | | 10.43 | % |
| Per Common Share Data | | | | | | | | | | | | | | | | | | | | |
| Net Income: | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.09 | | | $ | 0.04 | | | $ | 0.34 | | | $ | 0.48 | | | $ | 0.51 | |
| Diluted | | | 0.09 | | | | 0.04 | | | | 0.34 | | | | 0.47 | | | | 0.50 | |
| Core operating earnings (2) | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 0.10 | | | | 0.04 | | | | 0.36 | | | | 0.54 | | | | 0.51 | |
| Diluted | | | 0.10 | | | | 0.04 | | | | 0.36 | | | | 0.54 | | | | 0.50 | |
| Dividends | | | 0.17 | | | | 0.26 | | | | 0.26 | | | | 0.26 | | | | 0.26 | |
| Market Value: | | | | | | | | | | | | | | | | | | | | |
| High | | $ | 14.50 | | | $ | 17.66 | | | $ | 20.00 | | | $ | 22.51 | | | $ | 26.93 | |
| Low | | | 6.00 | | | | 10.00 | | | | 15.90 | | | | 17.30 | | | | 20.58 | |
| Close | | | 7.73 | | | | 11.01 | | | | 16.01 | | | | 18.35 | | | | 22.02 | |
| Book Value | | | 23.67 | | | | 23.37 | | | | 23.93 | | | | 24.01 | | | | 23.51 | |
| Shares outstanding, end of period (in thousands) | | | 8,117 | | | | 8,117 | | | | 8,118 | | | | 8,114 | | | | 7,059 | |
| Performance Ratios (annualized) | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest margin (1) | | | 3.72 | % | | | 3.81 | % | | | 3.92 | % | | | 3.76 | % | | | 3.52 | % |
| Return on average assets -GAAP | | | 0.18 | % | | | 0.07 | % | | | 0.58 | % | | | 0.84 | % | | | 0.89 | % |
| Return on average assets -Core Operating | | | 0.19 | % | | | 0.07 | % | | | 0.62 | % | | | 0.95 | % | | | 0.89 | % |
| Return on average equity- GAAP | | | 1.74 | % | | | 0.66 | % | | | 5.62 | % | | | 8.01 | % | | | 8.52 | % |
| Return on average equity- Core Operating | | | 1.85 | % | | | 0.69 | % | | | 5.97 | % | | | 9.15 | % | | | 8.52 | % |
| Efficiency ratio (3) -GAAP | | | 69.25 | % | | | 66.84 | % | | | 67.33 | % | | | 67.75 | % | | | 67.63 | % |
| Efficiency ratio (3) -Core Operating | | | 68.82 | % | | | 66.75 | % | | | 66.19 | % | | | 63.98 | % | | | 67.63 | % |
| Effective tax rate | | | 35.39 | % | | | 12.02 | % | | | 33.03 | % | | | 32.59 | % | | | 29.29 | % |
| Dividend payout ratio (basic) | | | 188.89 | % | | | 650.00 | % | | | 76.47 | % | | | 54.17 | % | | | 50.98 | % |
| (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) | | 4th Qtr 2008 | | | 3rd Qtr 2008 | | | 2nd Qtr 2008 | | | 1st Qtr 2008 | | | 4th Qtr 2007 | |
| Loan Portfolio Composition | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 251,807 | | | $ | 250,244 | | | $ | 251,887 | | | $ | 262,710 | | | $ | 229,588 | |
| Construction | | | 72,938 | | | | 75,822 | | | | 83,279 | | | | 66,283 | | | | 56,698 | |
| Commercial real estate | | | 755,740 | | | | 746,676 | | | | 731,472 | | | | 706,442 | | | | 580,621 | |
| Commercial | | | 356,574 | | | | 353,453 | | | | 351,812 | | | | 332,772 | | | | 283,072 | |
| Consumer finance | | | 41,012 | | | | 41,964 | | | | 41,251 | | | | 41,209 | | | | 37,743 | |
| Home equity and improvement | | | 161,106 | | | | 158,992 | | | | 153,715 | | | | 151,563 | | | | 128,080 | |
| Total loans | | | 1,639,177 | | | | 1,627,151 | | | | 1,613,416 | | | | 1,560,979 | | | | 1,315,802 | |
| Less: | | | | | | | | | | | | | | | | | | | | |
| Loans in process | | | 20,892 | | | | 29,794 | | | | 29,585 | | | | 24,581 | | | | 25,074 | |
| Deferred loan origination fees | | | 1,050 | | | | 1,030 | | | | 1,080 | | | | 1,044 | | | | 1,032 | |
| Allowance for loan loss | | | 24,592 | | | | 23,445 | | | | 20,578 | | | | 18,556 | | | | 13,890 | |
| Net Loans | | $ | 1,592,643 | | | $ | 1,572,882 | | | $ | 1,562,173 | | | $ | 1,516,798 | | | $ | 1,275,806 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan loss activity | | | | | | | | | | | | | | | | | | | | |
| Beginning allowance | | $ | 23,445 | | | $ | 20,578 | | | $ | 18,556 | | | $ | 13,890 | | | $ | 13,427 | |
| Provision for loan losses | | | 3,824 | | | | 4,907 | | | | 2,797 | | | | 1,058 | | | | 603 | |
| Reserve from acquisitions | | | - | | | | 121 | | | | 38 | | | | 4,099 | | | | - | |
| Credit loss charge-offs: | | | | | | | | | | | | | | | | | | | | |
| One to four family residential real estate | | | 369 | | | | 478 | | | | 281 | | | | 57 | | | | 33 | |
| Commercial real estate | | | 1,480 | | | | 1,495 | | | | 319 | | | | 464 | | | | 135 | |
| Commercial | | | 593 | | | | | | | | 220 | | | | - | | | | 7 | |
| Consumer finance | | | 224 | | | | 73 | | | | 56 | | | | 27 | | | | 42 | |
| Home equity and improvement | | | 57 | | | | 216 | | | | 18 | | | | 72 | | | | 30 | |
| Total charge-offs | | | 2,723 | | | | 2,262 | | | | 894 | | | | 620 | | | | 247 | |
| Total recoveries | | | 46 | | | | 101 | | | | 81 | | | | 129 | | | | 107 | |
| Net charge-offs (recoveries) | | | 2,677 | | | | 2,161 | | | | 813 | | | | 491 | | | | 140 | |
| Ending allowance | | $ | 24,592 | | | $ | 23,445 | | | $ | 20,578 | | | $ | 18,556 | | | $ | 13,890 | |
| | | | | | | | | | | | | | | | | | | | | |
| Credit Quality | | | | | | | | | | | | | | | | | | | | |
| Non-accrual loans | | $ | 28,009 | | | $ | 24,630 | | | $ | 17,727 | | | $ | 13,497 | | | $ | 9,217 | |
| Restructured loans, accruing | | | 6,250 | | | | 905 | | | | - | | | | - | | | | - | |
| Total non-performing loans (2) | | | 34,259 | | | | 25,535 | | | | 17,727 | | | | 13,497 | | | | 9,217 | |
| Real estate owned (REO) | | | 7,000 | | | | 4,776 | | | | 3,158 | | | | 3,448 | | | | 2,460 | |
| Total non-performing assets (2) | | $ | 41,259 | | | $ | 30,311 | | | $ | 20,885 | | | $ | 16,945 | | | $ | 11,677 | |
| Net charge-offs | | | 2,677 | | | | 2,161 | | | | 813 | | | | 491 | | | | 140 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses / loans | | | 1.52 | % | | | 1.47 | % | | | 1.30 | % | | | 1.21 | % | | | 1.08 | % |
| Allowance for loan losses / non-performing assets | | | 59.60 | % | | | 77.35 | % | | | 98.53 | % | | | 109.51 | % | | | 118.95 | % |
| Allowance for loan losses / non-performing loans | | | 71.78 | % | | | 91.82 | % | | | 116.08 | % | | | 137.48 | % | | | 150.70 | % |
| Non-performing assets / loans plus REO | | | 2.54 | % | | | 1.89 | % | | | 1.32 | % | | | 1.10 | % | | | 0.90 | % |
| Non-performing assets / total assets | | | 2.11 | % | | | 1.57 | % | | | 1.08 | % | | | 0.90 | % | | | 0.73 | % |
| Net charge-offs / average loans (annualized) | | | 0.67 | % | | | 0.56 | % | | | 0.21 | % | | | 0.15 | % | | | 0.04 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Deposit Balances | | | | | | | | | | | | | | | | | | | | |
| Non-interest-bearing demand deposits | | $ | 176,063 | | | $ | 158,139 | | | $ | 181,034 | | | $ | 168,049 | | | $ | 121,563 | |
| Interest-bearing demand deposits and money market | | | 374,488 | | | | 365,251 | | | | 401,401 | | | | 408,979 | | | | 342,367 | |
| Savings deposits | | | 132,145 | | | | 145,019 | | | | 146,697 | | | | 144,184 | | | | 105,873 | |
| Retail time deposits less than $100,000 | | | 578,244 | | | | 557,643 | | | | 514,209 | | | | 529,990 | | | | 509,720 | |
| Retail time deposits greater than $100,000 | | | 170,485 | | | | 177,848 | | | | 163,614 | | | | 162,400 | | | | 137,927 | |
| National/Brokered time deposits | | | 38,486 | | | | 31,904 | | | | 20,186 | | | | 99 | | | | 408 | |
| Total deposits | | $ | 1,469,911 | | | $ | 1,435,804 | | | $ | 1,427,141 | | | $ | 1,413,701 | | | $ | 1,217,858 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) 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 | |
| | | | | | | | | | | | | | | | |
| December 31, 2008 | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 251,826 | | | $ | 242,566 | | | $ | 4,676 | | | $ | 4,584 | | | $ | 1,101 | |
| Construction | | | 72,938 | | | | 72,814 | | | | 52 | | | | 72 | | | | - | |
| Commercial real estate | | | 755,740 | | | | 730,355 | | | | 5,406 | | | | 19,979 | | | | 2,205 | |
| Commercial | | | 356,574 | | | | 352,022 | | | | 1,671 | | | | 2,881 | | | | 2,944 | |
| Consumer finance | | | 41,012 | | | | 40,428 | | | | 515 | | | | 69 | | | | - | |
| Home equity and improvement | | | 161,106 | | | | 155,658 | | | | 5,024 | | | | 424 | | | | - | |
| Total loans | | $ | 1,639,196 | | | $ | 1,593,843 | | | $ | 17,344 | | | $ | 28,009 | | | $ | 6,250 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| 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 | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) All loans 90+ days past due are non accrual | | | | | | | | | | | | | | | | | |
13
