Exhibit 99.1
 | NEWS RELEASE | |
| Contact: | Donald P. Hileman | |
| President and CEO | ||
| (419) 782-5104 | ||
| dhileman@first-fed.com | ||
For Immediate Release
FIRST DEFIANCE FINANCIAL CORP. REPORTS
RECORD FULL YEAR EARNINGS OF $22.2 MILLION FOR 2013, UP 19% FROM FULL YEAR 2012
| · | Net Income of $5.1 million for 2013 fourth quarter compared to $5.2 million in the fourth quarter of 2012 |
| · | Fourth quarter 2013 includes $219,000 after tax loss on CDO securities |
| · | Loan growth $19.2 million during the quarter |
| · | Deposit growth $77.3 million during the quarter |
| · | Non-Performing loans down 15% from prior year |
| · | Net Interest Margin of 3.61% , down from 3.92% for the fourth quarter of 2012 |
DEFIANCE, OHIO (January 20, 2014)– First Defiance Financial Corp. (NASDAQ: FDEF) announced today record net income for the fiscal year ended December 31, 2013 totaled $22.2 million, or $2.19 per diluted common share, compared to $18.7 million or $1.81 per diluted common share for the year ended December 31, 2012. For the fourth quarter 2013, First Defiance earned $5.1 million, or $0.50 per diluted common share compared to $5.2 million; or $0.52 per diluted common share for the fourth quarter of 2012.
“The record earnings achieved in 2013 reflects a very successful year for First Defiance,” said Donald P. Hileman, President and CEO of First Defiance Financial Corp. “Despite the challenges of an often uncertain economy, our financial performance was strengthened, and our core profitability was enhanced particularly by improved credit quality.”
The fourth quarter 2013 results were negatively impacted by a $219,000 after tax loss, or $0.02 per diluted common share, as a result of $337,000 in other-than-temporary impairment losses recognized on $1.9 million of collateralized debt obligations (CDOs). The CDO securities were among those considered disallowed under the revised final “Volcker Rule” of the Dodd-Frank Act which requires the Company to liquidate these securities.
In the fourth quarter of 2012, the Company executed a balance sheet restructuring strategy taking an after tax loss of approximately $260,000 through selling $60 million in securities for a gain of $1.6 million and paying off $62 million in FHLB advances with a prepayment penalty of $2.0 million.
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Credit Quality
Non-performing loans totaled $27.8 million at December 31, 2013, a decrease from $32.6 million at December 31, 2012. In addition, First Defiance had $5.9 million of real estate owned at December 31, 2013 compared to $3.8 million at December 31, 2012. Accruing troubled debt restructured loans were $27.6 million at December 31, 2013 compared with $28.2 million at December 31, 2012. For the fourth quarter of 2013, First Defiance recorded net charge-offs of $1.5 million, down from $2.2 million in the fourth quarter of 2012 and up from $782,000 in the third quarter of 2013. The allowance for loan loss as a percentage of total loans was 1.58% at December 31, 2013 compared with 1.75% at December 31, 2012.
The fourth quarter results include expense for provision for loan losses of $475,000, compared with $2.6 million for the same period in 2012 and $476,000 in the third quarter of 2013.
“Non-performing assets declined during the quarter and are now at their lowest levels in over five years,” said Hileman. “Our improved credit quality resulted in lower provision expense and has been a key factor in our stronger earnings.”
Net Interest Income
Net interest income of $17.0 million in the fourth quarter of 2013 was down from $17.4 million in the fourth quarter of 2012. The net interest margin decreased to 3.61% in the fourth quarter of 2013 compared with 3.92% in the fourth quarter of 2012 and 3.84% in the third quarter of 2013. Yield on interest earning assets declined by 43 basis points, to 3.97% in the fourth quarter of 2013 from 4.40% in the fourth quarter of 2012. The cost of interest-bearing liabilities decreased by 14 basis points in the fourth quarter of 2013 to 0.46% from 0.60% in the fourth quarter of 2012.
“Our net interest income remained solid during the quarter, down just slightly from the previous quarter,” said Hileman. “Strong deposit growth during the quarter elevated our liquidity which led to some tightening in the net interest margin.”
Non-Interest Income
First Defiance’s non-interest income for the fourth quarter of 2013 was $6.5 million compared with $10.2 million in the fourth quarter of 2012. The fourth quarter of 2013 included $337,000 of securities losses realized on CDOs, while last year included $1.6 million in gains on the sale of investment securities from an executed balance sheet restructure strategy. In addition, mortgage banking income decreased to $1.3 million in the fourth quarter of 2013, down from $2.7 million in the fourth quarter of 2012. Gains from the sale of mortgage loans decreased in the fourth quarter of 2013 to $756,000 from $2.7 million in the fourth quarter of 2012. Mortgage loan servicing revenue was $918,000 in the fourth quarter of 2013, up from $888,000 in the fourth quarter of 2012. The Company had a negative change in the valuation adjustment in mortgage servicing assets (“MSR”) of only $4,000 in the fourth quarter of 2013 compared with a positive adjustment of $96,000 in the fourth quarter of 2012.
Service fees and other charges were $2.5 million in the fourth quarter of 2013, down from $2.6 million in the fourth quarter of 2012.
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Income from the sale of insurance and investment products was $2.1 million in the fourth quarter of 2013, up from $2.0 million in the fourth quarter of 2012.
“Our fee income business units contributed significantly to our overall profitability this quarter while mortgage banking revenues remained well below the prior year’s level due to the reduction in refinance activity” stated Hileman.
Non-Interest Expenses
Total non-interest expense was $15.9 million in the fourth quarter of 2013, a decrease from $17.5 million in the fourth quarter of 2012. The fourth quarter last year included $2.0 million of prepayment fees associated with the repayment of FHLB debt resulting from the executed balance sheet restructuring strategy.
Compensation and benefits increased to $8.3 million in the fourth quarter of 2013 compared to $7.8 million in the fourth quarter of 2012. The increase in compensation and benefits is mainly related to higher incentive compensation and merit increases from a year ago. FDIC insurance costs decreased to $359,000 in the fourth quarter of 2013 from $660,000 in the fourth 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 fourth quarter of 2013 from $1.2 million in the fourth quarter of 2012. Credit, collection and real estate owned costs were $835,000 in the fourth quarter of 2013, which included $452,000 of OREO write downs, compared to $488,000 in the same period of 2012. Other non-interest expense was $3.5 million in the fourth quarter of 2013, a decrease of $1.4 million from the fourth quarter of 2012 primarily due to the 2012 prepayment fee on repaying FHLB debt. The fourth quarter 2013 included secondary market buy-back losses of $51,000 compared to a reversal of $115,000 in accrued losses recorded in the fourth quarter 2012.
Annual Results
For the full year ended December 31, 2013, net income was $22.2 million, up 19% from $18.7 million in 2012. Net interest income for 2013 totaled $67.6 million, compared with $69.0 million for 2012. Average interest-earning assets decreased slightly to $1.85 billion in for 2013, compared to $1.86 billion in 2012. Net interest margin for 2013 was 3.76%, down 5 basis points from the 3.81% margin for 2012.
The provision for loan losses for 2013 was $1.8 million, compared to $10.9 million in 2012.
Non-interest income for the year 2013 was $30.6 million, compared to $34.4 million in 2012. Non-interest income for 2013 included $240,000 of net securities losses compared with $2.1 million of net securities gains for 2012. Service fees and other charges were $10.0 million for 2013, down from $10.8 million in 2012. Mortgage banking income decreased to $8.4 million for 2013, compared with $9.7 million in 2012. Insurance and investment sales revenues increased to $9.6 million for 2013, compared with $8.7 million for 2012 mainly due to an increase in contingent commissions of $436,000 in 2013.
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Non-interest expense decreased to $64.8 million for 2013 from $65.8 million in 2012. Compensation and benefits expense was $34.3 million for 2013 compared with $32.6 million for 2012 primarily due to merit increases from a year ago, higher incentive expenses and an increase in medical insurance costs. Credit, collection and real estate owned costs have increased $391,000 from 2012 and secondary market buy-back losses have increased $524,000 for 2013 compared to 2012.
Total Assets at $2.14 Billion
Total assets at December 31, 2013 were $2.14 billion, compared to $2.05 billion at December 31, 2012. Net loans receivable (excluding loans held for sale) were $1.56 billion at December 31, 2013, compared to $1.49 billion at December 31, 2012. Total cash and cash equivalents were $179.3 million at December 31, 2013 compared with $136.8 million at December 31, 2012. Also, at December 31, 2013, goodwill and other intangible assets totaled $65.0 million compared to $66.3 million at December 31, 2012.
Total deposits at December 31, 2013 were $1.74 billion compared with $1.67 billion at December 31, 2012. Non-interest bearing deposits at December 31, 2013 were $348.9 million compared to $315.1 million at December 31, 2012. Total stockholders’ equity was $272.1 million at December 31, 2013 compared to $258.1 million at December 31, 2012.
Dividend to be Paid February 28
The Board of Directors declared a quarterly cash dividend of $0.15 per common share payable February 28, 2014 to shareholders of record at the close of business on February 21, 2014. The dividend represents an annual dividend of 2.37% percent based on the First Defiance common stock closing price on January 17, 2014. First Defiance has approximately 9,719,521 common shares outstanding.
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, January 21, 2014 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/fdef140121.html.
Audio replay of the Internet Webcast will be available atwww.fdef.com until January 21, 2015 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 32 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 five offices throughout northwest Ohio.
For more information, visit the company’s Web site atwww.fdef.com.
Financial Statements and Highlights Follow-
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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 (Unaudited)
First Defiance Financial Corp.
| December 31, | December 31, | |||||||
| (in thousands) | 2013 | 2012 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Cash and amounts due from depository institutions | $ | 36,318 | $ | 45,832 | ||||
| Interest-bearing deposits | 143,000 | 91,000 | ||||||
| 179,318 | 136,832 | |||||||
| Securities | ||||||||
| Available-for sale, carried at fair value | 198,170 | 194,101 | ||||||
| Held-to-maturity, carried at amortized cost | 387 | 508 | ||||||
| 198,557 | 194,609 | |||||||
| Loans | 1,580,448 | 1,525,257 | ||||||
| Allowance for loan losses | (24,950 | ) | (26,711 | ) | ||||
| Loans, net | 1,555,498 | 1,498,546 | ||||||
| Loans held for sale | 9,120 | 22,064 | ||||||
| Mortgage servicing rights | 9,106 | 7,833 | ||||||
| Accrued interest receivable | 5,778 | 5,594 | ||||||
| Federal Home Loan Bank stock | 19,350 | 20,655 | ||||||
| Bank Owned Life Insurance | 42,715 | 41,832 | ||||||
| Office properties and equipment | 38,597 | 39,663 | ||||||
| Real estate and other assets held for sale | 5,859 | 3,805 | ||||||
| Goodwill | 61,525 | 61,525 | ||||||
| Core deposit and other intangibles | 3,497 | 4,738 | ||||||
| Deferred taxes | 565 | 78 | ||||||
| Other assets | 7,663 | 9,174 | ||||||
| Total Assets | $ | 2,137,148 | $ | 2,046,948 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Non-interest-bearing deposits | $ | 348,943 | $ | 315,132 | ||||
| Interest-bearing deposits | 1,386,849 | 1,352,340 | ||||||
| Total deposits | 1,735,792 | 1,667,472 | ||||||
| Advances from Federal Home Loan Bank | 22,520 | 12,796 | ||||||
| Notes payable and other interest-bearing liabilities | 51,919 | 51,702 | ||||||
| Subordinated debentures | 36,083 | 36,083 | ||||||
| Advance payments by borrowers for tax and insurance | 1,519 | 1,473 | ||||||
| Other liabilities | 17,168 | 19,294 | ||||||
| Total liabilities | 1,865,001 | 1,788,820 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock | - | - | ||||||
| Common stock, net | 127 | 127 | ||||||
| Common stock warrant | 878 | 878 | ||||||
| Additional paid-in-capital | 136,403 | 136,046 | ||||||
| Accumulated other comprehensive income | 545 | 4,274 | ||||||
| Retained earnings | 182,290 | 164,103 | ||||||
| Treasury stock, at cost | (48,096 | ) | (47,300 | ) | ||||
| Total stockholders’ equity | 272,147 | 258,128 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 2,137,148 | $ | 2,046,948 | ||||
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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) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Interest Income: | ||||||||||||||||
| Loans | $ | 17,037 | $ | 17,774 | $ | 68,077 | $ | 72,621 | ||||||||
| Investment securities | 1,397 | 1,504 | 5,596 | 7,123 | ||||||||||||
| Interest-bearing deposits | 108 | 51 | 282 | 300 | ||||||||||||
| FHLB stock dividends | 195 | 243 | 826 | 899 | ||||||||||||
| Total interest income | 18,737 | 19,572 | 74,781 | 80,943 | ||||||||||||
| Interest Expense: | ||||||||||||||||
| Deposits | 1,399 | 1,775 | 5,913 | 8,169 | ||||||||||||
| FHLB advances and other | 136 | 164 | 434 | 2,424 | ||||||||||||
| Subordinated debentures | 149 | 158 | 601 | 971 | ||||||||||||
| Notes Payable | 44 | 89 | 222 | 373 | ||||||||||||
| Total interest expense | 1,728 | 2,186 | 7,170 | 11,937 | ||||||||||||
| Net interest income | 17,009 | 17,386 | 67,611 | 69,006 | ||||||||||||
| Provision for loan losses | 475 | 2,618 | 1,824 | 10,924 | ||||||||||||
| Net interest income after provision for loan losses | 16,534 | 14,768 | 65,787 | 58,082 | ||||||||||||
| Non-interest Income: | ||||||||||||||||
| Service fees and other charges | 2,506 | 2,631 | 10,045 | 10,779 | ||||||||||||
| Mortgage banking income | 1,324 | 2,741 | 8,443 | 9,665 | ||||||||||||
| Gain on sale of non-mortgage loans | 49 | 20 | 101 | 70 | ||||||||||||
| Gain on sale of securities | - | 1,611 | 97 | 2,139 | ||||||||||||
| Impairment on securities | (337 | ) | (5 | ) | (337 | ) | (5 | ) | ||||||||
| Insurance and investment sales commissions | 2,089 | 1,997 | 9,627 | 8,676 | ||||||||||||
| Trust income | 216 | 146 | 761 | 616 | ||||||||||||
| Income from Bank Owned Life Insurance | 211 | 241 | 883 | 924 | ||||||||||||
| Other non-interest income | 415 | 798 | 950 | 1,510 | ||||||||||||
| Total Non-interest Income | 6,473 | 10,180 | 30,570 | 34,374 | ||||||||||||
| Non-interest Expense: | ||||||||||||||||
| Compensation and benefits | 8,310 | 7,806 | 34,301 | 32,566 | ||||||||||||
| Occupancy | 1,675 | 1,860 | 6,762 | 7,578 | ||||||||||||
| FDIC insurance premium | 359 | 660 | 1,616 | 2,691 | ||||||||||||
| State franchise tax | 486 | 846 | 2,323 | 2,495 | ||||||||||||
| Data processing | 1,313 | 1,183 | 5,125 | 4,660 | ||||||||||||
| Amortization of intangibles | 296 | 344 | 1,241 | 1,413 | ||||||||||||
| Other non-interest expense | 3,490 | 4,839 | 13,476 | 14,377 | ||||||||||||
| Total Non-interest Expense | 15,929 | 17,538 | 64,844 | 65,780 | ||||||||||||
| Income before income taxes | 7,078 | 7,410 | 31,513 | 26,676 | ||||||||||||
| Income taxes | 1,991 | 2,253 | 9,278 | 8,012 | ||||||||||||
| Net Income | $ | 5,087 | $ | 5,157 | $ | 22,235 | $ | 18,664 | ||||||||
| Dividends Accrued on Preferred Shares | - | - | - | (900 | ) | |||||||||||
| Accretion on Preferred Shares | - | - | - | (359 | ) | |||||||||||
| Redemption of Preferred Shares | - | - | - | 642 | ||||||||||||
| Net Income Applicable to Common Shares | $ | 5,087 | $ | 5,157 | $ | 22,235 | $ | 18,047 | ||||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 0.52 | $ | 0.53 | $ | 2.28 | $ | 1.86 | ||||||||
| Diluted | $ | 0.50 | $ | 0.52 | $ | 2.19 | $ | 1.81 | ||||||||
| Average Shares Outstanding: | ||||||||||||||||
| Basic | 9,766 | 9,729 | 9,764 | 9,728 | ||||||||||||
| Diluted | 10,198 | 10,012 | 10,171 | 9,998 | ||||||||||||
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Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2013 | 2012 | % change | 2013 | 2012 | % change | ||||||||||||||||||
| Summary of Operations | ||||||||||||||||||||||||
| Tax-equivalent interest income (1) | $ | 19,143 | $ | 19,993 | (4.3 | )% | $ | 76,413 | $ | 82,598 | (7.5 | )% | ||||||||||||
| Interest expense | 1,728 | 2,186 | (21.0 | ) | 7,170 | 11,937 | (39.9 | ) | ||||||||||||||||
| Tax-equivalent net interest income (1) | 17,415 | 17,807 | (2.2 | ) | 69,243 | 70,661 | (2.0 | ) | ||||||||||||||||
| Provision for loan losses | 475 | 2,618 | (81.9 | ) | 1,824 | 10,924 | (83.3 | ) | ||||||||||||||||
| Tax-equivalent NII after provision for loan loss (1) | 16,940 | 15,189 | 11.5 | 67,419 | 59,737 | 12.9 | ||||||||||||||||||
| Investment Securities gains | - | 1,611 | (100.0 | ) | 97 | 2,139 | (95.5 | ) | ||||||||||||||||
| Impairment losses on securities | (337 | ) | (5 | ) | NM | (337 | ) | (5 | ) | NM | ||||||||||||||
| Non-interest income (excluding securities gains/losses) | 6,810 | 8,574 | (20.6 | ) | 30,810 | 32,240 | (4.4 | ) | ||||||||||||||||
| Non-interest expense | 15,929 | 17,538 | (9.2 | ) | 64,844 | 65,780 | (1.4 | ) | ||||||||||||||||
| Income taxes | 1,991 | 2,253 | (11.6 | ) | 9,278 | 8,012 | 15.8 | |||||||||||||||||
| Net Income | 5,087 | 5,157 | (1.4 | ) | 22,235 | 18,664 | 19.1 | |||||||||||||||||
| Dividends Declared on Preferred Shares | - | - | NM | - | (900 | ) | NM | |||||||||||||||||
| Accretion on Preferred Shares | - | - | NM | - | (359 | ) | NM | |||||||||||||||||
| Redemption on Preferred Shares | - | - | NM | - | 642 | NM | ||||||||||||||||||
| Net Income Applicable to Common Shares | 5,087 | 5,157 | (1.4 | ) | 22,235 | 18,047 | 23.2 | |||||||||||||||||
| Tax equivalent adjustment (1) | 406 | 421 | (3.6 | ) | 1,632 | 1,655 | (1.4 | ) | ||||||||||||||||
| At Period End | ||||||||||||||||||||||||
| Assets | 2,137,148 | 2,046,948 | 4.4 | |||||||||||||||||||||
| Earning assets | 1,950,475 | 1,853,585 | 5.2 | |||||||||||||||||||||
| Loans | 1,580,448 | 1,525,257 | 3.6 | |||||||||||||||||||||
| Allowance for loan losses | 24,950 | 26,711 | (6.6 | ) | ||||||||||||||||||||
| Deposits | 1,735,792 | 1,667,472 | 4.1 | |||||||||||||||||||||
| Stockholders’ equity | 272,147 | 258,128 | 5.4 | |||||||||||||||||||||
| Average Balances | ||||||||||||||||||||||||
| Assets | 2,124,109 | 2,023,890 | 5.0 | 2,052,250 | 2,063,552 | (0.5 | ) | |||||||||||||||||
| Earning assets | 1,915,508 | 1,815,263 | 5.5 | 1,845,462 | 1,862,340 | (0.9 | ) | |||||||||||||||||
| Loans | 1,543,057 | 1,509,611 | 2.2 | 1,528,176 | 1,477,681 | 3.4 | ||||||||||||||||||
| Deposits and interest-bearing liabilities | 1,833,291 | 1,744,274 | 5.1 | 1,766,579 | 1,775,082 | (0.5 | ) | |||||||||||||||||
| Deposits | 1,719,319 | 1,633,432 | 5.3 | 1,661,895 | 1,619,637 | 2.6 | ||||||||||||||||||
| Stockholders’ equity | 270,856 | 256,304 | 5.7 | 265,065 | 267,194 | (0.8 | ) | |||||||||||||||||
| Stockholders’ equity / assets | 12.75 | % | 12.66 | % | 0.7 | 12.92 | % | 12.95 | % | (0.3 | ) | |||||||||||||
| Per Common Share Data | ||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||
| Basic | $ | 0.52 | $ | 0.53 | (1.9 | ) | $ | 2.28 | $ | 1.86 | 22.6 | |||||||||||||
| Diluted | 0.50 | 0.52 | (3.8 | ) | 2.19 | 1.81 | 21.0 | |||||||||||||||||
| Dividends | 0.10 | 0.05 | 100.0 | 0.40 | 0.20 | 100.0 | ||||||||||||||||||
| Market Value: | ||||||||||||||||||||||||
| High | $ | 27.25 | $ | 19.38 | 40.6 | $ | 28.46 | $ | 19.38 | 46.9 | ||||||||||||||
| Low | 23.31 | 15.75 | 48.0 | 18.42 | 14.41 | 27.8 | ||||||||||||||||||
| Close | 25.97 | 19.19 | 35.3 | 23.39 | 19.19 | 21.9 | ||||||||||||||||||
| Common Book Value | 27.91 | 26.44 | 5.5 | 27.91 | 26.44 | 5.5 | ||||||||||||||||||
| Tangible Common Book Value | 21.22 | 19.63 | 8.1 | 21.22 | 19.63 | 8.1 | ||||||||||||||||||
| Shares outstanding, end of period (000) | 9,720 | 9,729 | (0.1 | ) | 9,720 | 9,729 | (0.1 | ) | ||||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||||||
| Tax-equivalent net interest margin (1) | 3.61 | % | 3.92 | % | (7.9 | ) | 3.76 | % | 3.81 | % | (1.4 | ) | ||||||||||||
| Return on average assets | 0.95 | % | 1.01 | % | (6.3 | ) | 1.08 | % | 0.90 | % | 19.8 | |||||||||||||
| Return on average equity | 7.45 | % | 8.00 | % | (6.9 | ) | 8.39 | % | 6.99 | % | 20.1 | |||||||||||||
| Efficiency ratio (2) | 65.75 | % | 66.48 | % | (1.1 | ) | 64.81 | % | 63.93 | % | 1.4 | |||||||||||||
| Effective tax rate | 28.13 | % | 30.40 | % | (7.5 | ) | 29.44 | % | 30.03 | % | (2.0 | ) | ||||||||||||
| Dividend payout ratio (basic) | 19.23 | % | 9.43 | % | 103.8 | 17.54 | % | 10.75 | % | 63.2 | ||||||||||||||
| (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
| 8 |
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) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Gain from sale of mortgage loans | $ | 756 | $ | 2,709 | $ | 5,716 | $ | 10,599 | ||||||||
| Mortgage loan servicing revenue (expense): | ||||||||||||||||
| Mortgage loan servicing revenue | 918 | 888 | 3,564 | 3,387 | ||||||||||||
| Amortization of mortgage servicing rights | (346 | ) | (952 | ) | (2,098 | ) | (3,562 | ) | ||||||||
| Mortgage servicing rights valuation adjustments | (4 | ) | 96 | 1,261 | (759 | ) | ||||||||||
| 568 | 32 | 2,727 | (934 | ) | ||||||||||||
| Total revenue from sale and servicing of mortgage loans | $ | 1,324 | $ | 2,741 | $ | 8,443 | $ | 9,665 | ||||||||
| 9 |
Yield Analysis
First Defiance Financial Corp.
| Three Months Ended December 31, | ||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| 2013 | 2012 | |||||||||||||||||||||||
| Average | Yield | Average | Yield | |||||||||||||||||||||
| Balance | Interest(1) | Rate(2) | Balance | Interest(1) | Rate(2) | |||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Loans receivable | $ | 1,543,057 | $ | 17,055 | 4.39 | % | $ | 1,509,611 | $ | 17,799 | 4.69 | % | ||||||||||||
| Securities | 187,230 | 1,785 | 3.82 | % | 204,882 | 1,900 | 3.86 | % | ||||||||||||||||
| Interest Bearing Deposits | 165,871 | 108 | 0.26 | % | 80,115 | 51 | 0.25 | % | ||||||||||||||||
| FHLB stock | 19,350 | 195 | 4.00 | % | 20,655 | 243 | 4.68 | % | ||||||||||||||||
| Total interest-earning assets | 1,915,508 | 19,143 | 3.97 | % | 1,815,263 | 19,993 | 4.40 | % | ||||||||||||||||
| Non-interest-earning assets | 208,601 | 208,627 | ||||||||||||||||||||||
| Total assets | $ | 2,124,109 | $ | 2,023,890 | ||||||||||||||||||||
| Deposits and Interest-bearing liabilities: | ||||||||||||||||||||||||
| Interest bearing deposits | $ | 1,382,526 | $ | 1,399 | 0.40 | % | $ | 1,338,400 | $ | 1,775 | 0.53 | % | ||||||||||||
| FHLB advances and other | 22,604 | 136 | 2.39 | % | 19,015 | 164 | 3.43 | % | ||||||||||||||||
| Subordinated debentures | 36,129 | 149 | 1.64 | % | 55,688 | 89 | 0.64 | % | ||||||||||||||||
| Notes payable | 55,239 | 44 | 0.32 | % | 36,139 | 158 | 1.74 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,496,498 | 1,728 | 0.46 | % | 1,449,242 | 2,186 | 0.60 | % | ||||||||||||||||
| Non-interest bearing deposits | 336,793 | - | - | 295,032 | - | - | ||||||||||||||||||
| Total including non-interest-bearing demand deposits | 1,833,291 | 1,728 | 0.37 | % | 1,744,274 | 2,186 | 0.50 | % | ||||||||||||||||
| Other non-interest-bearing liabilities | 19,962 | 23,312 | ||||||||||||||||||||||
| Total liabilities | 1,853,253 | 1,767,586 | ||||||||||||||||||||||
| Stockholders' equity | 270,856 | 256,304 | ||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,124,109 | $ | 2,023,890 | ||||||||||||||||||||
| Net interest income; interest rate spread | $ | 17,415 | 3.51 | % | $ | 17,807 | 3.80 | % | ||||||||||||||||
| Net interest margin (3) | 3.61 | % | 3.92 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 128 | % | 125 | % | ||||||||||||||||||||
| Twelve Months Ended December 31, | ||||||||||||||||||||||||
| 2013 | 2012 | |||||||||||||||||||||||
| Average | Yield | Average | Yield | |||||||||||||||||||||
| Balance | Interest(1) | Rate | Balance | Interest(1) | Rate | |||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Loans receivable | $ | 1,528,176 | $ | 68,147 | 4.46 | % | $ | 1,477,681 | $ | 72,724 | 4.92 | % | ||||||||||||
| Securities | 191,039 | 7,158 | 3.78 | % | 247,442 | 8,675 | 3.63 | % | ||||||||||||||||
| Interest Bearing Deposits | 106,742 | 282 | 0.26 | % | 116,562 | 300 | 0.26 | % | ||||||||||||||||
| FHLB stock | 19,505 | 826 | 4.23 | % | 20,655 | 899 | 4.35 | % | ||||||||||||||||
| Total interest-earning assets | 1,845,462 | 76,413 | 4.14 | % | 1,862,340 | 82,598 | 4.44 | % | ||||||||||||||||
| Non-interest-earning assets | 206,788 | 201,212 | ||||||||||||||||||||||
| Total assets | $ | 2,052,250 | $ | 2,063,552 | ||||||||||||||||||||
| Deposits and Interest-bearing liabilities: | ||||||||||||||||||||||||
| Interest bearing deposits | $ | 1,353,304 | $ | 5,913 | 0.44 | % | $ | 1,352,724 | $ | 8,169 | 0.60 | % | ||||||||||||
| FHLB advances and other | 17,709 | 434 | 2.45 | % | 66,121 | 2,424 | 3.67 | % | ||||||||||||||||
| Subordinated debentures | 36,133 | 601 | 1.66 | % | 53,155 | 373 | 0.70 | % | ||||||||||||||||
| Notes payable | 50,842 | 222 | 0.44 | % | 36,169 | 971 | 2.68 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,457,988 | 7,170 | 0.49 | % | 1,508,169 | 11,937 | 0.79 | % | ||||||||||||||||
| Non-interest bearing deposits | 308,591 | - | - | 266,913 | - | - | ||||||||||||||||||
| Total including non-interest-bearing demand deposits | 1,766,579 | 7,170 | 0.41 | % | 1,775,082 | 11,937 | 0.67 | % | ||||||||||||||||
| Other non-interest-bearing liabilities | 20,606 | 21,276 | ||||||||||||||||||||||
| Total liabilities | 1,787,185 | 1,796,358 | ||||||||||||||||||||||
| Stockholders' equity | 265,065 | 267,194 | ||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,052,250 | $ | 2,063,552 | ||||||||||||||||||||
| Net interest income; interest rate spread | $ | 69,243 | 3.65 | % | $ | 70,661 | 3.64 | % | ||||||||||||||||
| Net interest margin (3) | 3.76 | % | 3.81 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 127 | % | 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) | 4th Qtr 2013 | 3rd Qtr 2013 | 2nd Qtr 2013 | 1st Qtr 2013 | 4th Qtr 2012 | |||||||||||||||
| Summary of Operations | ||||||||||||||||||||
| Tax-equivalent interest income (1) | $ | 19,143 | $ | 19,242 | $ | 19,143 | $ | 18,885 | $ | 19,993 | ||||||||||
| Interest expense | 1,728 | 1,680 | 1,814 | 1,949 | 2,186 | |||||||||||||||
| Tax-equivalent net interest income (1) | 17,415 | 17,562 | 17,329 | 16,936 | 17,807 | |||||||||||||||
| Provision for loan losses | 475 | 476 | 448 | 425 | 2,618 | |||||||||||||||
| Tax-equivalent NII after provision for loan losses (1) | 16,940 | 17,086 | 16,881 | 16,511 | 15,189 | |||||||||||||||
| Investment securities gains, net of impairment | (337 | ) | - | 44 | 53 | 1,606 | ||||||||||||||
| Non-interest income (excluding securities gains/losses) | 6,810 | 7,289 | 7,804 | 8,909 | 8,574 | |||||||||||||||
| Non-interest expense | 15,929 | 16,045 | 15,674 | 17,199 | 17,538 | |||||||||||||||
| Income taxes | 1,991 | 2,445 | 2,535 | 2,306 | 2,253 | |||||||||||||||
| Net income | 5,087 | 5,479 | 6,109 | 5,559 | 5,157 | |||||||||||||||
| Dividends Declared on Preferred Shares | - | - | - | - | - | |||||||||||||||
| Accretion on Preferred Shares | - | - | - | - | - | |||||||||||||||
| Redemption on Preferred Shares | - | - | - | - | - | |||||||||||||||
| Net Income Applicable to Common Shares | 5,087 | 5,479 | 6,109 | 5,559 | 5,157 | |||||||||||||||
| Tax equivalent adjustment (1) | 406 | 406 | 411 | 409 | 421 | |||||||||||||||
| At Period End | ||||||||||||||||||||
| Total assets | $ | 2,137,148 | $ | 2,058,430 | $ | 2,066,216 | $ | 2,039,411 | $ | 2,046,948 | ||||||||||
| Earning assets | 1,950,475 | 1,863,546 | 1,873,351 | 1,858,747 | 1,853,585 | |||||||||||||||
| Loans | 1,580,448 | 1,561,279 | 1,562,666 | 1,507,008 | 1,525,257 | |||||||||||||||
| Allowance for loan losses | 24,950 | 25,964 | 26,270 | 26,459 | 26,711 | |||||||||||||||
| Deposits | 1,735,792 | 1,658,492 | 1,635,708 | 1,656,348 | 1,667,472 | |||||||||||||||
| Stockholders’ equity | 272,147 | 269,359 | 264,497 | 262,643 | 258,128 | |||||||||||||||
| Stockholders’ equity / assets | 12.73 | % | 13.09 | % | 12.80 | % | 12.88 | % | 12.61 | % | ||||||||||
| Goodwill | 61,525 | 61,525 | 61,525 | 61,525 | 61,525 | |||||||||||||||
| Average Balances | ||||||||||||||||||||
| Total assets | $ | 2,124,109 | $ | 2,026,277 | $ | 2,030,707 | $ | 2,027,906 | $ | 2,023,890 | ||||||||||
| Earning assets | 1,915,508 | 1,816,626 | 1,825,730 | 1,823,089 | 1,815,263 | |||||||||||||||
| Loans | 1,543,057 | 1,548,718 | 1,520,708 | 1,500,222 | 1,509,611 | |||||||||||||||
| Deposits and interest-bearing liabilities | 1,833,291 | 1,741,850 | 1,745,084 | 1,746,092 | 1,744,274 | |||||||||||||||
| Deposits | 1,719,319 | 1,632,712 | 1,644,777 | 1,650,772 | 1,633,432 | |||||||||||||||
| Stockholders’ equity | 270,856 | 265,488 | 264,293 | 259,625 | 256,304 | |||||||||||||||
| Stockholders’ equity / assets | 12.75 | % | 13.10 | % | 13.01 | % | 12.80 | % | 12.66 | % | ||||||||||
| Per Common Share Data | ||||||||||||||||||||
| Net Income: | ||||||||||||||||||||
| Basic | $ | 0.52 | $ | 0.56 | $ | 0.63 | $ | 0.57 | $ | 0.53 | ||||||||||
| Diluted | 0.50 | 0.54 | 0.60 | 0.55 | 0.52 | |||||||||||||||
| Dividends | 0.10 | 0.10 | 0.10 | 0.10 | 0.05 | |||||||||||||||
| Market Value: | ||||||||||||||||||||
| High | $ | 27.25 | $ | 28.46 | $ | 23.75 | $ | 23.75 | $ | 19.38 | ||||||||||
| Low | 23.31 | 22.49 | 20.80 | 18.42 | 15.75 | |||||||||||||||
| Close | 25.97 | 23.39 | 22.55 | 23.32 | 19.19 | |||||||||||||||
| Common Book Value | 27.91 | 27.44 | 26.97 | 26.80 | 26.44 | |||||||||||||||
| Shares outstanding, end of period (in thousands) | 9,720 | 9,785 | 9,776 | 9,766 | 9,729 | |||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||
| Tax-equivalent net interest margin (1) | 3.61 | % | 3.84 | % | 3.82 | % | 3.78 | % | 3.92 | % | ||||||||||
| Return on average assets | 0.95 | % | 1.07 | % | 1.21 | % | 1.11 | % | 1.01 | % | ||||||||||
| Return on average equity | 7.45 | % | 8.19 | % | 9.27 | % | 8.68 | % | 8.00 | % | ||||||||||
| Efficiency ratio (2) | 65.75 | % | 64.56 | % | 62.36 | % | 66.55 | % | 66.48 | % | ||||||||||
| Effective tax rate | 28.13 | % | 30.86 | % | 29.33 | % | 29.32 | % | 30.40 | % | ||||||||||
| Common dividend payout ratio (basic) | 19.23 | % | 17.86 | % | 15.87 | % | 17.54 | % | 9.43 | % | ||||||||||
| (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) | 4th Qtr 2013 | 3rd Qtr 2013 | 2nd Qtr 2013 | 1st Qtr 2013 | 4th Qtr 2012 | |||||||||||||||
| Loan Portfolio Composition | ||||||||||||||||||||
| One to four family residential real estate | $ | 195,752 | $ | 191,984 | $ | 196,802 | $ | 197,675 | $ | 200,826 | ||||||||||
| Construction | 86,058 | 59,567 | 41,519 | 33,398 | 37,788 | |||||||||||||||
| Commercial real estate | 819,618 | 821,115 | 820,412 | 802,098 | 797,385 | |||||||||||||||
| Commercial | 388,236 | 386,160 | 396,158 | 365,551 | 383,817 | |||||||||||||||
| Consumer finance | 16,902 | 16,659 | 16,817 | 15,549 | 15,936 | |||||||||||||||
| Home equity and improvement | 106,930 | 105,727 | 106,570 | 106,524 | 108,718 | |||||||||||||||
| Total loans | 1,613,496 | 1,581,212 | 1,578,278 | 1,520,795 | 1,544,470 | |||||||||||||||
| Less: | ||||||||||||||||||||
| Loans in process | 32,290 | 19,189 | 14,876 | 13,084 | 18,478 | |||||||||||||||
| Deferred loan origination fees | 758 | 744 | 736 | 703 | 735 | |||||||||||||||
| Allowance for loan loss | 24,950 | 25,964 | 26,270 | 26,459 | 26,711 | |||||||||||||||
| Net Loans | $ | 1,555,498 | $ | 1,535,315 | $ | 1,536,396 | $ | 1,480,549 | $ | 1,498,546 | ||||||||||
| Allowance for loan loss activity | ||||||||||||||||||||
| Beginning allowance | $ | 25,964 | $ | 26,270 | $ | 26,459 | $ | 26,711 | $ | 26,310 | ||||||||||
| Provision for loan losses | 475 | 476 | 448 | 425 | 2,618 | |||||||||||||||
| Credit loss charge-offs: | ||||||||||||||||||||
| One to four family residential real estate | 175 | 78 | 184 | 206 | 976 | |||||||||||||||
| Commercial real estate | 1,097 | 829 | 283 | 266 | 593 | |||||||||||||||
| Commercial | 670 | 39 | 316 | 205 | 541 | |||||||||||||||
| Consumer finance | 7 | 33 | 8 | 46 | 59 | |||||||||||||||
| Home equity and improvement | 144 | 170 | 170 | 272 | 497 | |||||||||||||||
| Total charge-offs | 2,093 | 1,149 | 961 | 995 | 2,666 | |||||||||||||||
| Total recoveries | 604 | 367 | 324 | 318 | 449 | |||||||||||||||
| Net charge-offs (recoveries) | 1,489 | 782 | 637 | 677 | 2,217 | |||||||||||||||
| Ending allowance | $ | 24,950 | $ | 25,964 | $ | 26,270 | $ | 26,459 | $ | 26,711 | ||||||||||
| Credit Quality | ||||||||||||||||||||
| Total non-performing loans (1) | $ | 27,847 | $ | 30,512 | $ | 28,650 | $ | 35,283 | $ | 32,570 | ||||||||||
| Real estate owned (REO) | 5,859 | 5,518 | 6,546 | 4,313 | 3,805 | |||||||||||||||
| Total non-performing assets (2) | $ | 33,706 | $ | 36,030 | $ | 35,196 | $ | 39,596 | $ | 36,375 | ||||||||||
| Net charge-offs | 1,489 | 782 | 637 | 677 | 2,217 | |||||||||||||||
| Restructured loans, accruing (3) | 27,630 | 28,010 | 28,732 | 27,981 | 28,203 | |||||||||||||||
| Allowance for loan losses / loans | 1.58 | % | 1.66 | % | 1.68 | % | 1.76 | % | 1.75 | % | ||||||||||
| Allowance for loan losses / non-performing assets | 74.02 | % | 72.06 | % | 74.64 | % | 66.82 | % | 73.43 | % | ||||||||||
| Allowance for loan losses / non-performing loans | 89.60 | % | 85.09 | % | 91.69 | % | 74.99 | % | 82.01 | % | ||||||||||
| Non-performing assets / loans plus REO | 2.12 | % | 2.30 | % | 2.24 | % | 2.62 | % | 2.38 | % | ||||||||||
| Non-performing assets / total assets | 1.58 | % | 1.75 | % | 1.70 | % | 1.94 | % | 1.78 | % | ||||||||||
| Net charge-offs / average loans (annualized) | 0.39 | % | 0.20 | % | 0.17 | % | 0.18 | % | 0.59 | % | ||||||||||
| Deposit Balances | ||||||||||||||||||||
| Non-interest-bearing demand deposits | $ | 348,943 | $ | 300,891 | $ | 301,742 | $ | 291,765 | $ | 315,132 | ||||||||||
| Interest-bearing demand deposits and money market | 715,939 | 681,987 | 659,249 | 681,061 | 664,857 | |||||||||||||||
| Savings deposits | 185,121 | 182,271 | 182,784 | 177,336 | 166,945 | |||||||||||||||
| Retail time deposits less than $100,000 | 313,335 | 318,317 | 321,422 | 330,870 | 342,472 | |||||||||||||||
| Retail time deposits greater than $100,000 | 172,454 | 175,026 | 168,573 | 173,379 | 176,029 | |||||||||||||||
| National/Brokered time deposits | - | - | 1,938 | 1,937 | 2,037 | |||||||||||||||
| Total deposits | $ | 1,735,792 | $ | 1,658,492 | $ | 1,635,708 | $ | 1,656,348 | $ | 1,667,472 | ||||||||||
| (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 | ||||||||||||
| December 31, 2013 | ||||||||||||||||
| One to four family residential real estate | $ | 195,752 | $ | 190,854 | $ | 1,625 | $ | 3,273 | ||||||||
| Construction | 86,058 | 86,058 | - | - | ||||||||||||
| Commercial real estate | 819,618 | 803,218 | 566 | 15,834 | ||||||||||||
| Commercial | 388,236 | 379,889 | 20 | 8,327 | ||||||||||||
| Consumer finance | 16,902 | 16,771 | 131 | - | ||||||||||||
| Home equity and improvement | 106,930 | 105,211 | 1,306 | 413 | ||||||||||||
| Total loans | $ | 1,613,496 | $ | 1,582,001 | $ | 3,648 | $ | 27,847 | ||||||||
| September 30, 2013 | ||||||||||||||||
| One to four family residential real estate | $ | 191,984 | $ | 188,065 | $ | 760 | $ | 3,159 | ||||||||
| Construction | 59,567 | 59,567 | - | - | ||||||||||||
| Commercial real estate | 821,115 | 802,115 | 574 | 18,426 | ||||||||||||
| Commercial | 386,160 | 377,116 | 295 | 8,749 | ||||||||||||
| Consumer finance | 16,659 | 16,616 | 43 | - | ||||||||||||
| Home equity and improvement | 105,727 | 103,997 | 1,552 | 178 | ||||||||||||
| Total loans | $ | 1,581,212 | $ | 1,547,476 | $ | 3,224 | $ | 30,512 | ||||||||
| 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 | ||||||||
| 13 |