Premier Financial (PFC) 8-K Results of Operations and Financial Condition

NEWS RELEASE   Contact:             William J. Small Chairman, President and CEO (419) 782-5015 bsmall@first-fed.com

For Immediate Release Exhibit 99.1

FIRST DEFIANCE FINANCIAL CORP. ANNOUNCES 2013

RECORD SECOND QUARTER EARNINGS

· Net Income of $6.1 million for 2013 second quarter, up from $3.9 million in the 2012 second quarter

· Average loans increased $20.5 million, or improving 1.4% from the 2013 first quarter

· Provision for loan losses of $448,000, down from $4.1 million in the 2012 second quarter

· Net Interest Margin of 3.82%, up from 3.75% for the second quarter of 2012

DEFIANCE, OHIO (July 22, 2013)– First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the second quarter ended June 30, 2013 totaled $6.1 million, or $0.60 per diluted common share, compared to $3.9 million or $0.38 per diluted common share for the quarter ended June 30, 2012.

“The momentum that we carried from the strong finish in 2012 has continued into the first half of this year and resulted in record earnings for the second consecutive quarter in 2013,” said William J. Small, Chairman, President, and CEO of First Defiance Financial Corp. “We are still very cognizant of the challenges the banking industry faces, but we believe we are well positioned to deal with them.”

Credit Quality

Asset quality continues to improve with non-performing loans decreasing 31% from June 30, 2012 and 19% decrease from the prior quarter. Non-performing loans totaled $28.7 million at June 30, 2013, a decrease from $41.7 million at June 30, 2012. In addition, First Defiance had $6.5 million of real estate owned at June 30, 2013 compared to $3.5 million at June 30, 2012. Accruing troubled debt restructured loans were $28.7 million at June 30, 2013 compared with $3.6 million at June 30, 2012. For the second quarter of 2013, First Defiance recorded net charge-offs of $637,000, down from $6.5 million in the second quarter of 2012 and relatively flat with the first quarter of 2013. The allowance for loan loss as a percentage of total loans was 1.68% at June 30, 2013 compared with 1.76% at June 30, 2012.

The second quarter results include expense for provision for loan losses of $448,000, compared with $4.1 million for the same period in 2012 and $425,000 in the first quarter of 2013.

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“We are pleased with the significant improvement in asset quality during the quarter including significant declines in nonperforming loans, net charge-offs and classified loans. We also saw improvement in delinquency levels in all categories of our loan portfolio.” said Small. “As a result of this progress, provision expense was well below the level recorded in the 2012 second quarter.”

Net Interest Income down compared to second quarter 2012

Net interest income of $16.9 million in the second quarter of 2013 was down from $17.2 million in the second quarter of 2012. The net interest margin increased to 3.82% in the second quarter of 2013 compared with 3.75% in the second quarter of 2012 and 3.78% in the first quarter of 2013. Yield on interest earning assets declined by 22 basis points, to 4.22% in the second quarter of 2013 from 4.44% in the second quarter of 2012. The cost of interest-bearing liabilities decreased by 36 basis points in the second quarter of 2013 to 0.50% from 0.86% in the second quarter of 2012.

“We still face significant net interest income challenges, but are pleased with the improvement versus the linked quarter,” said Small. “The increase in the net interest margin this quarter was driven by a boost in loan balances. The challenges on the net interest margin in this low rate environment persist and will continue as competitive pressures remain strong.”

Non-Interest Income down slightly from second quarter 2012

First Defiance’s non-interest income for the second quarter of 2013 was $7.8 million compared with $8.0 million in the second quarter of 2012. Mortgage banking income increased to $2.4 million in the second quarter of 2013, up from $2.3 million in the second quarter of 2012. Gains from the sale of mortgage loans decreased in the second quarter of 2013 to $1.9 million from $2.5 million in the second quarter of 2012. Mortgage loan servicing revenue was $875,000 in the second quarter of 2013, up slightly from $832,000 in the second quarter of 2012. Service fees and other charges were $2.5 million in the second quarter of 2013, down from $2.7 million in the second quarter of 2012.

The prolonged low rate environment helped contribute to solid second quarter 2013 mortgage originations, although they were down slightly from the second quarter of 2012. The Company had a positive change in the valuation adjustment in mortgage servicing assets (“MSR”) of $312,000 in the second quarter of 2013 compared with a negative adjustment of $177,000 in the second quarter of 2012. The MSR positive valuation adjustment is a reflection of the increase in fair value of certain sectors of the Company’s portfolio of MSRs. The increase was driven by an increase in market rates in the quarter which also contributed to lower amortization of servicing rights.

Income from the sale of insurance and investment products increased to $2.3 million in the second quarter of 2013, from $2.2 million in the second quarter of 2012.

“We are satisfied with the ongoing strong mortgage banking contribution this quarter even though we experienced a decline in refinance business” continued Mr. Small. “The slower refinance activity has been partially offset by an increase in purchase business. We are hopeful the strengthening housing market will result in additional purchase activity throughout the second half of 2013.”

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Non-Interest Expenses

Total non-interest expense was $15.7 million in the second quarter of 2013, an increase from $15.5 million in the second quarter of 2012.

Compensation and benefits increased to $8.5 million in the second quarter of 2013 compared to $8.0 million in the second quarter of 2012. The Company accrued for incentive payments based on exceeding 2013 targeted performance in the first half of 2013. FDIC insurance costs decreased to $275,000 in the second quarter of 2013 from $672,000 in the second quarter of 2012 due to the improvement in the Company’s risk category late in the first quarter of 2013. Data processing cost increased to $1.3 million in the second quarter of 2013 from $1.2 million in the second quarter of 2012. Other non-interest expense was $3.0 million in the second quarter of 2013, flat with the second quarter of 2012. Credit, collection and real estate owned costs were $474,000 in the second quarter of 2013 compared to $485,000 in the same period of 2012, and secondary market buy-back losses were $61,000 in the second quarter of 2013 compared to $73,000 in the same period of 2012.

Year-To-Date Results

For the six month period ended June 30, 2013, net interest income totaled $33.4 million, compared with $34.4 million in the first six months of 2012. Average interest-earning assets decreased to $1.824 billion in the first half of 2013, compared to $1.892 billion in the first half of 2012. Net interest margin for the first six months of 2013 was 3.78%, up 2 basis points from the 3.76% margin reported in the six month period ended June 30, 2012.

The provision for loan losses in the first half of 2013 was $873,000, compared to $7.6 million recorded during the first six months of 2012.

Non-interest income in the first half of 2013 was $16.8 million, compared to $16.4 million during the same period of 2012. Service fees and other charges were $4.9 million in the first half of 2013, down from $5.4 million in the first half of 2012. Mortgage banking income increased to $5.3 million in the first half of 2013, compared with $4.7 million in the first half of 2012. Insurance and investment sales revenues increased to $5.3 million in the first half of 2013, compared with $4.7 million during the first half of 2012. Non-interest income in the first half of 2013 included $97,000 of gain on the sale of securities compared with $425,000 in the first half of 2012.

Non-interest expense increased to $32.9 million in the first six months of 2013 from $31.8 million in the first half of 2012. Compensation and benefits expense was $17.3 million in the first half of 2013 compared with $16.5 million in the first half of 2012. Credit, collection and real estate owned costs have decreased $84,000 in the first six months of 2013 from the first six months of 2012 and secondary market buy-back losses have increased $569,000 in the first six months of 2013 from the first six months of 2012. An accrual of $581,000 was established in the first quarter of 2013 for estimated secondary market buy-back losses based on an estimated exposure of repurchase requests notifications from Fannie Mae’s post-foreclosure review process. As of June 30, 2013, the accrual for estimated buy-back losses is $567,000.

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Total Assets at $2.07 Billion

Total assets at June 30, 2013 were $2.07 billion, compared to $2.05 billion at December 31, 2012. Net loans receivable (excluding loans held for sale) were $1.54 billion at June 30, 2013, compared to $1.50 billion at December 31, 2012. Total cash and cash equivalents were $127.7 million at June 30, 2013 compared with $136.8 million at December 31, 2012 and $103.5 million at June 30, 2012. Also, at June 30, 2013, goodwill and other intangible assets totaled $65.6 million compared to $66.3 million at December 31, 2012 and $67.0 million at June 30, 2012.

Total deposits at June 30, 2013 were $1.64 billion compared with $1.67 billion at December 31, 2012 and $1.61 billion at June 30, 2012. Non-interest bearing deposits at June 30, 2013 were $301.7 million compared to $315.1 million at December 31, 2012 and $261.2 million at June 30, 2012. Total stockholders’ equity was $264.5 million at June 30, 2013 compared to $258.1 million at December 31, 2012 and $249.9 million at June 30, 2012.

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, July 23, 2013 to discuss the earnings results and business trends. The conference call may be accessed by calling1-888-317-6016. A live webcast may be accessed at http://services.choruscall.com/links/fdef130723.html.

Audio replay of the Internet Webcast will be available atwww.fdef.com until July 23, 2014 at 9:00 a.m.

First Defiance Financial Corp.

First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal operates 33 full service branches and 42 ATM locations in northwest Ohio, southeast Michigan and northeast Indiana. First Insurance Group is a full-service insurance agency with six offices throughout northwest Ohio.

For more information, visit the company’s Web site atwww.fdef.com.

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Financial Statements and Highlights Follow-

Safe Harbor Statement

This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms,future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability 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, 2012. 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)						(Unaudited)
	June 30,			December 31,			June 30,
(in thousands)	2013			2012			2012
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions	$	39,743		$	45,832		$	31,517
Interest-bearing deposits		88,000			91,000			72,000
		127,743			136,832			103,517
Securities
Available-for sale, carried at fair value		188,079			194,101			278,829
Held-to-maturity, carried at amortized cost		445			508			600
		188,524			194,609			279,429
Loans		1,562,666			1,525,257			1,500,637
Allowance for loan losses		(26,270	)		(26,711	)		(26,409	)
Loans, net		1,536,396			1,498,546			1,474,228
Loans held for sale		14,808			22,064			13,125
Mortgage servicing rights		8,731			7,833			8,274
Accrued interest receivable		5,891			5,594			6,063
Federal Home Loan Bank stock		19,353			20,655			20,655
Bank Owned Life Insurance		42,292			41,832			41,347
Office properties and equipment		38,866			39,663			40,825
Real estate and other assets held for sale		6,546			3,805			3,538
Goodwill		61,525			61,525			61,525
Core deposit and other intangibles		4,090			4,738			5,427
Deferred taxes		2,291			78			-
Other assets		9,160			9,174			9,663
Total Assets	$	2,066,216		$	2,046,948		$	2,067,616
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits	$	301,742		$	315,132		$	261,211
Interest-bearing deposits		1,333,966			1,352,340			1,352,400
Total deposits		1,635,708			1,667,472			1,613,611
Advances from Federal Home Loan Bank		62,773			12,796			81,819
Notes payable and other interest-bearing liabilities		47,560			51,702			50,527
Subordinated debentures		36,083			36,083			36,083
Advance payments by borrowers for tax and insurance		1,844			1,473			989
Deferred taxes		-			-			1,376
Other liabilities		17,751			19,294			33,341
Total liabilities		1,801,719			1,788,820			1,817,746
Stockholders’ Equity
Preferred stock, net of discount		-			-			992
Common stock, net		127			127			127
Common stock warrant		878			878			878
Additional paid-in-capital		136,111			136,046			136,025
Accumulated other comprehensive income		204			4,274			4,660
Retained earnings		173,679			164,103			154,500
Treasury stock, at cost		(46,502	)		(47,300	)		(47,312	)
Total stockholders’ equity		264,497			258,128			249,870
Total Liabilities and Stockholders’ Equity	$	2,066,216		$	2,046,948		$	2,067,616

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 Consolidated Statements of Income (Unaudited)

First Defiance Financial Corp.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands, except per share amounts)	2013		2012			2013		2012
Interest Income:
Loans	$	17,047	$	18,197		$	33,843	$	36,847
Investment securities		1,406		1,994			2,809		3,777
Interest-bearing deposits		72		114			130		206
FHLB stock dividends		207		214			426		443
Total interest income		18,732		20,519			37,208		41,273
Interest Expense:
Deposits		1,511		2,116			3,158		4,485
FHLB advances and other		92		750			182		1,501
Subordinated debentures		150		310			302		641
Notes Payable		61		97			121		201
Total interest expense		1,814		3,273			3,763		6,828
Net interest income		16,918		17,246			33,445		34,445
Provision for loan losses		448		4,097			873		7,600
Net interest income after provision for loan losses		16,470		13,149			32,572		26,845
Non-interest Income:
Service fees and other charges		2,549		2,687			4,934		5,358
Mortgage banking income		2,443		2,258			5,273		4,704
Gain on sale of non-mortgage loans		2		33			17		42
Gain on sale of securities		44		382			97		425
Insurance and investment sales commissions		2,277		2,192			5,313		4,727
Trust income		186		169			349		323
Income from Bank Owned Life Insurance		231		219			460		439
Other non-interest income		116		54			367		396
Total Non-interest Income		7,848		7,994			16,810		16,414
Non-interest Expense:
Compensation and benefits		8,475		8,049			17,273		16,514
Occupancy		1,694		1,760			3,348		3,548
FDIC insurance premium		275		672			931		1,341
State franchise tax		627		512			1,256		1,026
Data processing		1,313		1,169			2,494		2,337
Amortization of intangibles		312		349			648		724
Other non-interest expense		2,978		3,021			6,923		6,302
Total Non-interest Expense		15,674		15,532			32,873		31,792
Income before income taxes		8,644		5,611			16,509		11,467
Income taxes		2,535		1,690			4,841		3,393
Net Income	$	6,109	$	3,921		$	11,668	$	8,074
Dividends Accrued on Preferred Shares		-		(435	)		-		(897	)
Accretion on Preferred Shares		-		(305	)		-		(351	)
Redemption of Preferred Shares		-		642			-		642
Net Income Applicable to Common Shares	$	6,109	$	3,823		$	11,668	$	7,468
Earnings per common share:
Basic	$	0.63	$	0.39		$	1.20	$	0.77
Diluted	$	0.60	$	0.38		$	1.15	$	0.75
Average Shares Outstanding:
Basic		9,774		9,729			9,755		9,728
Diluted		10,156		9,985			10,130		9,980

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Financial Summary and Comparison

First Defiance Financial Corp.

	(Unaudited)									(Unaudited)
	Three Months Ended									Six Months Ended
	June 30,									June 30,
(dollars in thousands, except per share data)	2013			2012			% change			2013			2012			% change
Summary of Operations
Tax-equivalent interest income (1)	$	19,143		$	20,935			(8.6	)%	$	38,028		$	42,080			(9.6	)%
Interest expense		1,814			3,273			(44.6	)		3,763			6,828			(44.9	)
Tax-equivalent net interest income (1)		17,329			17,662			(1.9	)		34,265			35,252			(2.8	)
Provision for loan losses		448			4,097			(89.1	)		873			7,600			(88.5	)
Tax-equivalent NII after provision for loan loss (1)		16,881			13,565			24.4			33,392			27,652			20.8
Investment Securities gains		44			382			(88.5	)		97			425			(77.2	)
Impairment losses on securities		-			-			-			-			-			-
Non-interest income (excluding securities gains/losses)		7,804			7,612			2.5			16,713			15,989			4.5
Non-interest expense		15,674			15,532			0.9			32,873			31,792			3.4
Income taxes		2,535			1,690			50.0			4,841			3,393			42.7
Net Income		6,109			3,921			55.8			11,668			8,074			44.5
Dividends Declared on Preferred Shares		-			(435	)		(100.0	)		-			(897	)		(100.0	)
Accretion on Preferred Shares		-			(305	)		(100.0	)		-			(351	)		(100.0	)
Redemption on Preferred Shares		-			642			NM			-			642			NM
Net Income Applicable to Common Shares		6,109			3,823			59.8			11,668			7,468			56.2
Tax equivalent adjustment (1)		411			416			(1.2	)		820			807			1.6
At Period End
Assets		2,066,216			2,067,616			(0.1	)
Earning assets		1,873,351			1,885,846			(0.7	)
Loans		1,562,666			1,500,637			4.1
Allowance for loan losses		26,270			26,409			(0.5	)
Deposits		1,635,708			1,613,611			1.4
Stockholders’ equity		264,497			249,870			5.9
Average Balances
Assets		2,030,707			2,102,675			(3.4	)		2,029,307			2,091,589			(3.0	)
Earning assets		1,825,730			1,903,714			(4.1	)		1,824,105			1,892,190			(3.6	)
Loans		1,520,708			1,462,312			4.0			1,510,465			1,459,559			3.5
Deposits and interest-bearing liabilities		1,745,084			1,800,036			(3.1	)		1,745,588			1,790,873			(2.5	)
Deposits		1,644,777			1,629,094			1.0			1,647,774			1,619,685			1.7
Stockholders’ equity		264,293			281,031			(6.0	)		261,959			280,440			(6.6	)
Stockholders’ equity / assets		13.01	%		13.37	%		(2.6	)		12.91	%		13.41	%		(3.7	)
Per Common Share Data
Net Income
Basic	$	0.63		$	0.39			61.5		$	1.20		$	0.77			55.8
Diluted		0.60			0.38			57.9			1.15			0.75			53.3
Dividends		0.10			0.05			100.0			0.20			0.10			100.0
Market Value:
High	$	23.75		$	17.46			36.0		$	23.75		$	17.76			33.7
Low		20.80			15.23			36.6			18.42			14.41			27.8
Close		22.55			17.12			31.7			22.55			17.12			31.7
Common Book Value		26.97			25.49			5.8			26.97			25.49			5.8
Tangible Common Book Value		20.25			18.61			8.8			20.25			18.61			8.8
Shares outstanding, end of period (000)		9,776			9,729			0.5			9,776			9,729			0.5
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.82	%		3.75	%		2.0			3.78	%		3.76	%		0.5
Return on average assets		1.21	%		0.75	%		60.9			1.16	%		0.77	%		49.4
Return on average equity		9.27	%		5.61	%		65.2			8.96	%		5.77	%		55.1
Efficiency ratio (2)		62.36	%		61.45	%		1.5			64.48	%		62.04	%		3.9
Effective tax rate		29.33	%		30.12	%		(2.6	)		29.32	%		29.59	%		(0.9	)
Dividend payout ratio (basic)		15.87	%		12.82	%		23.8			16.67	%		12.99	%		NM

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

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

NM Percentage change not meaningful

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 Income from Mortgage Banking

Revenue from sales and servicing of mortgage loans consisted of the following: 

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(dollars in thousands)	2013			2012			2013			2012
Gain from sale of mortgage loans	$	1,890		$	2,458		$	4,066		$	5,002
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		875			832			1,745			1,675
Amortization of mortgage servicing rights		(634	)		(855	)		(1,323	)		(1,718	)
Mortgage servicing rights valuation adjustments		312			(177	)		785			(255	)
		553			(200	)		1,207			(298	)
Total revenue from sale and servicing of mortgage loans	$	2,443		$	2,258		$	5,273		$	4,704

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 Yield Analysis

First Defiance Financial Corp.

	Three Months Ended June 30,
	(dollars in thousands)
	2013							2012
	Average				Yield			Average				Yield
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,520,708	$	17,064		4.50	%	$	1,462,312	$	18,223		5.01	%
Securities		195,942		1,800		3.82	%		273,017		2,384		3.62	%
Interest Bearing Deposits		89,116		72		0.32	%		147,730		114		0.31	%
FHLB stock		19,964		207		4.16	%		20,655		214		4.17	%
Total interest-earning assets		1,825,730		19,143		4.22	%		1,903,714		20,935		4.44	%
Non-interest-earning assets		204,977							198,961
Total assets	$	2,030,707						$	2,102,675
Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	1,343,678	$	1,511		0.45	%	$	1,368,144	$	2,116		0.62	%
FHLB advances and other		14,443		92		2.55	%		81,823		750		3.69	%
Notes payable		49,728		61		0.49	%		52,921		97		0.74	%
Subordinated debentures		36,136		150		1.66	%		36,198		310		3.44	%
Total interest-bearing liabilities		1,443,985		1,814		0.50	%		1,539,086		3,273		0.86	%
Non-interest bearing deposits		301,099		-		-			260,950		-		-
Total including non-interest-bearing demand deposits		1,745,084		1,814		0.42	%		1,800,036		3,273		0.73	%
Other non-interest-bearing liabilities		21,330							21,608
Total liabilities		1,766,414							1,821,644
Stockholders' equity		264,293							281,031
Total liabilities and stockholders' equity	$	2,030,707						$	2,102,675
Net interest income; interest rate spread			$	17,329		3.72	%			$	17,662		3.58	%
Net interest margin (3)						3.82	%						3.75	%
Average interest-earning assets  to average interest bearing liabilities						126	%						124	%

	Six Months Ended June 30,
	2013							2012
	Average				Yield			Average				Yield
	Balance		Interest(1)		Rate			Balance		Interest(1)		Rate
Interest-earning assets:
Loans receivable	$	1,510,465	$	33,878		4.50	%	$	1,459,559	$	36,902		5.08	%
Securities		196,257		3,594		3.81	%		255,279		4,529		3.68	%
Interest Bearing Deposits		97,724		130		0.27	%		156,697		206		0.26	%
FHLB stock		19,659		426		4.35	%		20,655		443		4.31	%
Total interest-earning assets		1,824,105		38,028		4.18	%		1,892,190		42,080		4.47	%
Non-interest-earning assets		205,202							199,399
Total assets	$	2,029,307						$	2,091,589
Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	1,350,112	$	3,158		0.47	%	$	1,366,583	$	4,485		0.66	%
FHLB advances and other		13,616		182		2.68	%		81,828		1,501		3.69	%
Notes payable		48,062		121		0.50	%		53,162		201		0.76	%
Subordinated debentures		36,136		302		1.68	%		36,198		641		3.56	%
Total interest-bearing liabilities		1,447,926		3,763		0.52	%		1,537,771		6,828		0.89	%
Non-interest bearing deposits		297,662		-		-			253,102		-		-
Total including non-interest-bearing demand deposits		1,745,588		3,763		0.43	%		1,790,873		6,828		0.77	%
Other non-interest-bearing liabilities		21,760							20,276
Total liabilities		1,767,348							1,811,149
Stockholders' equity		261,959							280,440
Total liabilities and stockholders' equity	$	2,029,307						$	2,091,589
Net interest income; interest rate spread			$	34,265		3.66	%			$	35,252		3.58	%
Net interest margin (3)						3.78	%						3.76	%
Average interest-earning assets  to average interest bearing liabilities						126	%						123	%

(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.

10

Selected Quarterly Information

First Defiance Financial Corp.

(dollars in thousands, except per share data)	2nd Qtr 2013			1st Qtr 2013			4th Qtr 2012			3rd Qtr 2012			2nd Qtr 2012
Summary of Operations
Tax-equivalent interest income (1)	$	19,143		$	18,885		$	19,993		$	20,525		$	20,935
Interest expense		1,814			1,949			2,186			2,923			3,273
Tax-equivalent net interest income (1)		17,329			16,936			17,807			17,602			17,662
Provision for loan losses		448			425			2,618			705			4,097
Tax-equivalent NII after provision for loan losses (1)		16,881			16,511			15,189			16,897			13,565
Investment securities gains, net of impairment		44			53			1,606			103			382
Non-interest income (excluding securities gains/losses)		7,804			8,909			8,574			7,677			7,612
Non-interest expense		15,674			17,199			17,538			16,450			15,532
Income taxes		2,535			2,306			2,253			2,366			1,690
Net income		6,109			5,559			5,157			5,434			3,921
Dividends Declared on Preferred Shares		-			-			-			(3	)		(435	)
Accretion on Preferred Shares		-			-			-			(8	)		(305	)
Redemption on Preferred Shares		-			-			-			-			642
Net Income Applicable to Common Shares		6,109			5,559			5,157			5,423			3,823
Tax equivalent adjustment (1)		411			409			421			427			416
At Period End
Total assets	$	2,066,216		$	2,039,411		$	2,046,948		$	2,055,672		$	2,067,616
Earning assets		1,873,351			1,858,747			1,853,585			1,874,671			1,885,846
Loans		1,562,666			1,507,008			1,525,257			1,512,132			1,500,637
Allowance for loan losses		26,270			26,459			26,711			26,310			26,409
Deposits		1,635,708			1,656,348			1,667,472			1,609,350			1,613,611
Stockholders’ equity		264,497			262,643			258,128			255,136			249,870
Stockholders’ equity / assets		12.80	%		12.88	%		12.61	%		12.41	%		12.08	%
Goodwill		61,525			61,525			61,525			61,525			61,525
Average Balances
Total assets	$	2,030,707		$	2,027,906		$	2,023,890		$	2,047,139		$	2,102,675
Earning assets		1,825,730			1,823,089			1,815,263			1,849,715			1,903,714
Loans		1,520,708			1,500,222			1,509,611			1,481,995			1,462,312
Deposits and interest-bearing liabilities		1,745,084			1,746,092			1,744,274			1,774,312			1,800,036
Deposits		1,644,777			1,650,772			1,633,432			1,605,749			1,629,094
Stockholders’ equity		264,293			259,625			256,304			251,592			281,031
Stockholders’ equity / assets		13.01	%		12.80	%		12.66	%		12.29	%		13.37	%
Per Common Share Data
Net Income:
Basic	$	0.63		$	0.57		$	0.53		$	0.56		$	0.39
Diluted		0.60			0.55			0.52			0.54			0.38
Dividends		0.10			0.10			0.05			0.05			0.05
Market Value:
High	$	23.75		$	23.75		$	19.38		$	18.06		$	17.46
Low		20.80			18.42			15.75			15.80			15.23
Close		22.55			23.32			19.19			17.26			17.12
Common Book Value		26.97			26.80			26.44			26.13			25.49
Shares outstanding, end of period (in thousands)		9,776			9,766			9,729			9,729			9,729
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.82	%		3.78	%		3.92	%		3.80	%		3.75	%
Return on average assets		1.21	%		1.11	%		1.01	%		1.06	%		0.75	%
Return on average equity		9.27	%		8.68	%		8.00	%		8.59	%		5.61	%
Efficiency ratio (2)		62.36	%		66.55	%		66.48	%		65.07	%		61.45	%
Effective tax rate		29.33	%		29.32	%		30.40	%		30.33	%		30.12	%
Common dividend payout ratio (basic)		15.87	%		17.54	%		9.43	%		8.93	%		12.82	%

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

11

Selected Quarterly Information

First Defiance Financial Corp.

(dollars in thousands, except per share data)	2nd Qtr 2013			1st Qtr 2013			4th Qtr 2012			3rd Qtr 2012			2nd Qtr 2012
Loan Portfolio Composition
One to four family residential real estate	$	196,802		$	197,675		$	200,826		$	210,053		$	210,520
Construction		41,519			33,398			37,788			31,428			22,923
Commercial real estate		820,412			802,098			797,385			792,351			775,526
Commercial		396,158			365,551			383,817			365,510			372,266
Consumer finance		16,817			15,549			15,936			16,785			17,127
Home equity and improvement		106,570			106,524			108,718			111,563			112,427
Total loans		1,578,278			1,520,795			1,544,470			1,527,690			1,510,789
Less:
Loans in process		14,876			13,084			18,478			14,831			9,439
Deferred loan origination fees		736			703			735			727			713
Allowance for loan loss		26,270			26,459			26,711			26,310			26,409
Net Loans	$	1,536,396		$	1,480,549		$	1,498,546		$	1,485,822		$	1,474,228
Allowance for loan loss activity
Beginning allowance		26,459			26,711			26,310			26,409		$	28,833
Provision for loan losses		448			425			2,618			705			4,097
Credit loss charge-offs:
One to four family residential real estate		184			206			976			217			584
Commercial real estate		283			266			593			780			5,448
Commercial		316			205			541			355			486
Consumer finance		8			46			59			19			14
Home equity and improvement		170			272			497			203			254
Total charge-offs		961			995			2,666			1,574			6,786
Total recoveries		324			318			449			770			265
Net charge-offs (recoveries)		637			677			2,217			804			6,521
Ending allowance	$	26,270		$	26,459		$	26,711		$	26,310		$	26,409
Credit Quality
Total non-performing loans (1)	$	28,650		$	35,283		$	32,570		$	37,803		$	41,702
Real estate owned (REO)		6,546			4,313			3,805			2,843			3,538
Total non-performing assets (2)	$	35,196		$	39,596		$	36,375		$	40,646		$	45,240
Net charge-offs		637			677			2,217			804			6,521
Restructured loans, accruing (3)		28,732			27,981			28,203			4,305			3,581
Allowance for loan losses / loans		1.68	%		1.76	%		1.75	%		1.74	%		1.76	%
Allowance for loan losses / non-performing assets		74.64	%		66.82	%		73.43	%		64.73	%		58.38	%
Allowance for loan losses / non-performing loans		91.69	%		74.99	%		82.01	%		69.60	%		63.33	%
Non-performing assets / loans plus REO		2.24	%		2.62	%		2.38	%		2.68	%		3.01	%
Non-performing assets / total assets		1.70	%		1.94	%		1.78	%		1.98	%		2.19	%
Net charge-offs / average loans (annualized)		0.17	%		0.18	%		0.59	%		0.22	%		1.78	%
Deposit Balances
Non-interest-bearing demand deposits	$	301,742		$	291,765		$	315,132		$	271,305		$	261,211
Interest-bearing demand deposits and money market		659,249			681,061			664,857			636,510			628,760
Savings deposits		182,784			177,336			166,945			166,155			165,699
Retail time deposits less than $100,000		321,422			330,870			342,472			356,369			370,443
Retail time deposits greater than $100,000		168,573			173,379			176,029			176,725			180,594
National/Brokered time deposits		1,938			1,937			2,037			2,286			6,904
Total deposits	$	1,635,708		$	1,656,348		$	1,667,472		$	1,609,350		$	1,613,611

(1) Non-performing loans consist of non-accrual loans.

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

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

12

 Loan Delinquency Information

First Defiance Financial Corp.

(dollars in thousands)	Total Balance		Current		30 to 89 days past due		Non Accrual Loans
June 30, 2013
One to four family residential real estate	$	196,802	$	192,257	$	1,480	$	3,065
Construction		41,519		41,519		-		-
Commercial real estate		820,412		799,070		1,348		19,994
Commercial		396,158		390,510		258		5,390
Consumer finance		16,817		16,628		189		-
Home equity and improvement		106,570		105,163		1,206		201
Total loans	$	1,578,278	$	1,545,147	$	4,481	$	28,650
December 31, 2012
One to four family residential real estate	$	200,826	$	195,188	$	2,036	$	3,602
Construction		37,788		37,788		-		-
Commercial real estate		797,385		773,170		1,125		23,090
Commercial		383,817		376,548		1,608		5,661
Consumer finance		15,936		15,701		235		-
Home equity and improvement		108,718		106,002		2,499		217
Total loans	$	1,544,470	$	1,504,397	$	7,503	$	32,570
June 30, 2012
One to four family residential real estate	$	210,520	$	200,839	$	1,578	$	5,352
Construction		22,923		22,923		-		-
Commercial real estate		775,526		744,657		1,234		29,000
Commercial		372,266		364,164		1,043		6,900
Consumer finance		17,127		16,906		217		4
Home equity and improvement		112,427		110,977		968		446
Total loans	$	1,510,789	$	1,460,466	$	5,040	$	41,702

13