Premier Financial (PFC) 8-K First Defiance Financial Corp. Reports

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 $3.19 PER SHARE FOR 2016,

UP 13.1% FROM FULL YEAR 2015

· Earnings per diluted share of $0.81 for 2016 fourth quarter, up from $0.71 per share in the fourth quarter of 2015

· Net income of $7.4 million for 2016 fourth quarter compared to $6.6 million in the fourth quarter of 2015

· Net interest margin of 3.76% for the 2016 fourth quarter, compared to 3.77% in the fourth quarter of 2015

· Loan growth $14.8 million during the 2016 fourth quarter

· Deposit growth $53.9 million during the 2016 fourth quarter

· Non-performing loans declined 11.8% from 2015 year end

DEFIANCE, OHIO (January 23, 2017)– First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the fiscal year ended December 31, 2016 totaled $28.8 million, or $3.19 per diluted common share, compared to $26.4 million or $2.82 per diluted common share for the year ended December 31, 2015.

For the fourth quarter 2016, First Defiance earned $7.4 million, or $0.81 per diluted common share compared to $6.6 million, or $0.71 per diluted common share for the fourth quarter of 2015.

“We are very pleased that our strong finish to 2016 allowed us to mark our fourth consecutive year of record earnings performance, with diluted earnings per share up 13.1% over last year. Also for the year, our return on assets was 1.20% on total assets that grew $178 million, or 7.7%,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “This notable performance in 2016 leaves us optimistic for overcoming potential challenges in 2017 and completing our upcoming merger with Commercial Bancshares, Inc. in February.”

Net interest income up compared to fourth quarter 2015

Net interest income of $20.5 million in the fourth quarter of 2016 was up from $19.0 million in the fourth quarter of 2015. The growth in net interest income of $1.5 million included interest recoveries primarily from loan payoffs of $501,000 in the fourth quarter 2016 compared to $228,000 of interest recoveries in the fourth quarter 2015. Net interest margin was 3.76% for the fourth quarter of 2016, up from 3.69% in the third quarter 2016, but down slightly from 3.77% in the fourth quarter of 2015. Yield on interest earning assets increased by 4 basis points, to 4.16% in the fourth quarter of 2016 from 4.12% in the fourth quarter of 2015. The cost of interest-bearing liabilities increased by 7 basis points in the fourth quarter of 2016 to 0.53% from 0.46% in the fourth quarter of 2015.

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“Our net interest income expansion in the fourth quarter was mainly driven by our continued balance sheet growth coupled with our steady net interest margin and further enhanced by recovered interest on loan payoffs,” said Hileman. “In addition, we believe our interest rate risk is well balanced and positioned for prospective rate changes in 2017.”

Non-interest income up from fourth quarter 2015

First Defiance’s non-interest income for the fourth quarter of 2016 was $8.3 million compared to $7.7 million in the fourth quarter of 2015. Mortgage banking income increased to $1.9 million in the fourth quarter of 2016, up from $1.5 million in the fourth quarter of 2015 due to higher volumes of both purchase and refinance loans throughout our market area. Gains from the sale of mortgage loans increased in the fourth quarter of 2016 to $1.2 million from $836,000 in the fourth quarter of 2015. Mortgage loan servicing revenue was $922,000 in the fourth quarter of 2016, up slightly from $910,000 in the fourth quarter of 2015. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $241,000 in the fourth quarter of 2016 compared to a positive adjustment of $75,000 in the fourth quarter of 2015.

For the fourth quarter 2016, service fees and other charges were $2.7 million, down $33,000 from $2.7 million in the fourth quarter of 2015; and commissions from the sale of insurance products were $2.3 million, up $45,000 from $2.3 million in the fourth quarter of 2015. Trust income was $445,000 in the fourth quarter of 2016, up from $367,000 in the fourth quarter of 2015.

“Total non-interest income in the fourth quarter grew $563,000, up 7.3% over the fourth quarter last year,” said Hileman. “We were particularly pleased with our success in mortgage banking with fourth quarter loan origination levels up 38% from a year ago, and in trust income with revenues up 21% over the fourth quarter last year.”

Non-interest expenses up from fourth quarter 2015

Total non-interest expense was $18.2 million in the fourth quarter of 2016, up from $17.3 million in the fourth quarter of 2015. The fourth quarter 2016 included expenses of $292,000 related to the pending merger of Commercial Bancshares, Inc. and $300,000 for a termination of a lease. Compensation and benefits in the fourth quarter of 2016 was $9.9 million, an increase of $64,000 compared to the fourth quarter of 2015. Increases in compensation for merit raises and staff additions for growth were mostly offset by lower costs for medical insurance and other benefits. Occupancy expense was $2.0 million in the fourth quarter 2016, up $147,000 from the fourth quarter 2015. Data processing cost was $1.6 million in the fourth quarter of 2016, up $213,000 from the fourth quarter of 2015. Other non-interest expense of $3.9 million in the fourth quarter of 2016, increased from $3.3 million in the fourth quarter of 2015 primarily due to merger related expenses and the lease termination.

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Credit quality

Non-performing loans totaled $14.3 million at December 31, 2016, a decrease from $16.3 million at December 31, 2015. In addition, First Defiance had $455,000 of real estate owned at December 31, 2016, down from $1.3 million at December 31, 2015. Accruing troubled debt restructured loans were $10.5 million at December 31, 2016, a decrease from $11.2 million at December 31, 2015. For the fourth quarter of 2016, First Defiance recorded net recoveries of $110,000, compared to net recoveries of $129,000 in the fourth quarter of 2015. The allowance for loan loss as a percentage of total loans was 1.33% at December 31, 2016, compared to 1.41% at December 31, 2015.

The fourth quarter results included a credit provision for loan losses of $149,000 compared to an expense of $43,000 for the same period in 2015.

“Our fourth quarter results showed continued improvement in our asset quality as non-performing assets declined $4.1 million during the quarter to 0.60% of total assets,” said Hileman. “This reduction, along with net recoveries on loans in the quarter, resulted in both a credit provision expense for the fourth quarter and an increase of our allowance for loan losses coverage of non-performing loans to 180% at year end.”

Annual results

For the full year ended on December 31, 2016, net income totaled $28.8 million, or $3.19 per diluted common share, compared to $26.4 million or $2.82 per diluted common share for 2015.

Net interest income for 2016 totaled $78.9 million, compared with $74.1 million for 2015. Average interest-earning assets increased to $2.17 billion for 2016, compared to $2.00 billion in 2015. Net interest margin for 2016 was 3.74%, down 7 basis points from the 3.81% margin for 2015.

The provision for loan losses for 2016 was $283,000, compared to $136,000 in 2015, reflecting the continued strong credit quality throughout the year.

Non-interest income for the year 2016 was $34.0 million, compared to $31.8 million in 2015. Service fees and other charges were $10.9 million for 2016, up from $10.8 million in 2015. Mortgage banking income increased to $7.3 million for 2016, compared to $6.7 million in 2015. Gains on the sale of non-mortgage loans were $753,000 for 2016, compared to $824,000 during 2015. Insurance and investment sales revenues increased to $10.4 million for 2016, compared to $10.1 million for 2015. Non-interest income for 2016 included $509,000 of net securities gains compared to $22,000 of net securities gains for 2015.

Non-interest expense increased to $71.1 million for 2016 from $67.9 million in 2015. Compensation and benefits expense was $40.2 million for 2016 compared with $37.8 million for 2015. The $2.4 million increase in compensation and benefits over the prior year is mainly related to merit increases and new staff for growth strategies, higher incentive compensation accruals and higher medical insurance costs. Other expenses increased $603,000 mainly due to acquisition related costs for the pending acquisition of Commercial Bancshares, Inc. and the expense related to the lease termination. Occupancy expense also increased $221,000, and data processing expense increased $284,000. These increases were partially offset by decreases in FDIC insurance premiums of $155,000, amortization of intangibles of $165,000 and financial institutions taxes of $2,000.

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Total assets at $2.5 billion

Total assets at December 31, 2016 were $2.48 billion compared to $2.30 billion at December 31, 2015. Net loans receivable (excluding loans held for sale) were $1.91 billion at December 31, 2016, compared to $1.78 billion at December 31, 2015. Total cash and cash equivalents were $99.0 million at December 31, 2016, compared to $79.8 million at December 31, 2015. Also, at December 31, 2016, goodwill and other intangible assets totaled $63.1 million compared to $63.7 million at December 31, 2015.

Total deposits at December 31, 2016 were $1.98 billion compared with $1.84 billion at December 31, 2015. Non-interest bearing deposits at December 31, 2016 were $487.7 million compared to $420.7 million at December 31, 2015. Total stockholders’ equity was $293.0 million at December 31, 2016, compared to $280.2 million at December 31, 2015.

Pending merger with Commercial Bancshares, Inc.

On August 23, 2016, First Defiance announced a definitive agreement to acquire Commercial Bancshares, Inc. and its wholly-owned subsidiary, Commercial Savings Bank (“CSB”). CSB, a $342 million commercial bank, operates 7 full-service branches in Wyandot, Marion and Hancock counties in Ohio. The merger is expected to close in the first quarter of 2017 and is subject to Commercial Bancshares’ shareholder approval and other conditions set forth in the merger agreement.

Dividend to be paid February 24

The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable February 24, 2017 to shareholders of record at the close of business on February 17, 2017. The dividend represents an annual dividend of 2.09 percent based on the First Defiance common stock closing price on January 20, 2017. First Defiance has approximately 8,984,456 common shares outstanding.

Conference call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, January 24, 2017 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. In addition, a live webcast may be accessed athttp://services.choruscall.com/links/fdef170124.html.

The replay of the conference call Webcast will be available atwww.fdef.com until Wednesday, January 24, 2018 at 9:00 a.m. ET.

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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 Bank operates 35 full-service branches and numerous ATM locations in northwest Ohio, southeast Michigan and northeast Indiana and a loan production office in Columbus, Ohio. First Insurance Group is a full-service insurance agency with six offices throughout northwest Ohio.

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

Financial Statements and Highlights Follow-

Safe Harbor Statement

This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: 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 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 First Defiance 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 our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2015. One or more of these factors have affected or could in the future affect First Defiance'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 First Defiance or any other persons, that our objectives and plans will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of First Defiance. We assume no obligation to update any forward-looking statements.

As required by U.S. GAAP, First Defiance will evaluate the impact of subsequent events through the issuance date of its December 31, 2016 consolidated financial statements as part of its Annual Report on Form 10-K to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

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Consolidated Balance Sheets (Unaudited)
First Defiance Financial Corp.
	December 31,			December 31,
(in thousands)	2016			2015
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions	$	53,003		$	38,769
Interest-bearing deposits		46,000			41,000
		99,003			79,769
Securities
Available-for sale, carried at fair value		250,992			236,435
Held-to-maturity, carried at amortized cost		184			243
		251,176			236,678
Loans		1,940,487			1,802,217
Allowance for loan losses		(25,884	)		(25,382	)
Loans, net		1,914,603			1,776,835
Loans held for sale		9,607			5,523
Mortgage servicing rights		9,595			9,248
Accrued interest receivable		6,760			6,171
Federal Home Loan Bank stock		13,798			13,801
Bank Owned Life Insurance		52,817			51,908
Office properties and equipment		36,958			38,166
Real estate and other assets held for sale		455			1,321
Goodwill		61,798			61,798
Core deposit and other intangibles		1,336			1,871
Deferred Taxes		358			-
Other assets		17,479			14,587
Total Assets	$	2,475,743		$	2,297,676
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits	$	487,663		$	420,691
Interest-bearing deposits		1,493,965			1,415,446
Total deposits		1,981,628			1,836,137
Advances from Federal Home Loan Bank		103,943			59,902
Notes payable and other interest-bearing liabilities		31,816			57,188
Subordinated debentures		36,083			36,083
Advance payments by borrowers for tax and insurance		2,650			2,674
Deferred taxes		-			877
Other liabilities		26,605			24,618
Total Liabilities		2,182,725			2,017,479
Stockholders’ Equity
Preferred stock		-			-
Common stock, net		127			127
Additional paid-in-capital		126,390			125,734
Accumulated other comprehensive income		215			3,622
Retained earnings		240,592			219,737
Treasury stock, at cost		(74,306	)		(69,023	)
Total stockholders’ equity		293,018			280,197
Total Liabilities and Stockholders’ Equity	$	2,475,743		$	2,297,676

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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)	2016			2015		2016		2015
Interest Income:
Loans	$	20,975		$	18,901	$	80,217	$	73,346
Investment securities		1,576			1,680		6,247		6,769
Interest-bearing deposits		80			56		367		169
FHLB stock dividends		139			139		552		552
Total interest income		22,770			20,776		87,383		80,836
Interest Expense:
Deposits		1,648			1,394		6,261		5,341
FHLB advances and other		348			214		1,288		675
Subordinated debentures		205			162		753		613
Notes Payable		30			39		138		152
Total interest expense		2,231			1,809		8,440		6,781
Net interest income		20,539			18,967		78,943		74,055
Provision for loan losses		(149	)		43		283		136
Net interest income after provision for loan losses		20,688			18,924		78,660		73,919
Non-interest Income:
Service fees and other charges		2,701			2,734		10,909		10,752
Mortgage banking income		1,928			1,465		7,270		6,713
Gain on sale of non-mortgage loans		149			48		753		824
Gain on sale of securities		-			22		509		22
Insurance commissions		2,328			2,283		10,441		10,076
Trust income		445			367		1,701		1,462
Income from Bank Owned Life Insurance		223			237		909		895
Other non-interest income		519			574		1,538		1,059
Total Non-interest Income		8,293			7,730		34,030		31,803
Non-interest Expense:
Compensation and benefits		9,937			9,873		40,187		37,769
Occupancy		1,983			1,836		7,418		7,197
FDIC insurance premium		161			325		1,169		1,324
Financial institutions tax		442			443		1,781		1,783
Data processing		1,644			1,431		6,367		6,083
Amortization of intangibles		116			163		535		699
Other non-interest expense		3,897			3,276		13,636		13,034
Total Non-interest Expense		18,180			17,347		71,093		67,889
Income before income taxes		10,801			9,307		41,597		37,833
Income taxes		3,436			2,744		12,754		11,410
Net Income	$	7,365		$	6,563	$	28,843	$	26,423
Earnings per common share:
Basic	$	0.82		$	0.72	$	3.21	$	2.87
Diluted	$	0.81		$	0.71	$	3.19	$	2.82
Average Shares Outstanding:
Basic		8,982			9,146		8,980		9,221
Diluted		9,060			9,235		9,053		9,383

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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)	2016			2015			% change			2016			2015			% change
Summary of Operations
Tax-equivalent interest income (1)	$	23,219		$	21,256			9.2	%	$	89,213		$	82,741			7.8	%
Interest expense		2,231			1,809			23.3			8,440			6,781			24.5
Tax-equivalent net interest income (1)		20,988			19,447			7.9			80,773			75,960			6.3
Provision for loan losses		(149	)		43			NM			283			136			108.1
Tax-equivalent NII after provision for loan loss (1)		21,137			19,404			8.9			80,490			75,824			6.2
Investment Securities gains		-			22			NM			509			22			NM
Non-interest income (excluding securities gains/losses)		8,293			7,708			7.6			33,521			31,781			5.5
Non-interest expense		18,180			17,347			4.8			71,093			67,889			4.7
Income taxes		3,436			2,744			25.2			12,754			11,410			11.8
Net Income		7,365			6,563			12.2			28,843			26,423			9.2
Tax equivalent adjustment (1)		449			480			(6.5	)		1,830			1,905			(3.9	)
At Period End
Assets		2,475,743			2,297,676			7.7
Earning assets		2,261,068			2,099,219			7.7
Loans		1,940,487			1,802,217			7.7
Allowance for loan losses		25,884			25,382			2.0
Deposits		1,981,628			1,836,137			7.9
Stockholders’ equity		293,018			280,197			4.6
Average Balances
Assets		2,458,952			2,276,060			8.0			2,397,439			2,222,866			7.9
Earning assets		2,226,868			2,051,331			8.6			2,168,046			2,000,477			8.4
Loans		1,908,731			1,732,472			10.2			1,853,419			1,687,413			9.8
Deposits and interest-bearing liabilities		2,133,868			1,967,199			8.5			2,080,444			1,916,758			8.5
Deposits		1,954,631			1,823,396			7.2			1,905,621			1,787,876			6.6
Stockholders’ equity		292,301			279,192			4.7			285,634			277,645			2.9
Stockholders’ equity / assets		11.89	%		12.27	%		(3.1	)		11.91	%		12.49	%		(4.6	)
Per Common Share Data
Net Income
Basic	$	0.82		$	0.72			13.9		$	3.21		$	2.87			11.8
Diluted		0.81			0.71			14.1			3.19			2.82			13.1
Dividends		0.22			0.20			10.0			0.88			0.775			13.5
Market Value:
High	$	52.31		$	42.46			23.2		$	52.31		$	42.46			23.2
Low		36.91			35.01			5.4			34.80			29.05			19.8
Close		50.74			37.78			34.3			50.74			37.78			34.3
Common Book Value		32.62			30.78			6.0			32.62			30.78			6.0
Tangible Common Book Value (1)		25.59			23.79			7.6			25.59			23.79			7.6
Shares outstanding, end of period (000)		8,983			9,102			(1.3	)		8,983			9,102			(1.3	)
Performance Ratios (annualized)
Tax-equivalent net interest margin (2)		3.76	%		3.77	%		(0.4	)		3.74	%		3.81	%		(1.9	)
Return on average assets		1.19	%		1.14	%		4.2			1.20	%		1.19	%		1.2
Return on average equity		10.02	%		9.33	%		7.5			10.10	%		9.52	%		6.1
Efficiency ratio (3)		62.09	%		63.88	%		(2.8	)		62.20	%		63.01	%		(1.3	)
Effective tax rate		31.81	%		29.48	%		7.9			30.66	%		30.16	%		1.7
Dividend payout ratio (basic)		26.83	%		27.78	%		(3.4	)		27.41	%		27.00	%		1.5

(1) Tangible common book value = total stockholders' equity less the sum of goodwill, core deposit and other intangibles, and preferred stock divided by shares outstanding at the end of the period.

(2) 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%

(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.

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						Twelve Months Ended
	December 31,						December 31,
(dollars in thousands)	2016			2015			2016			2015
Gain from sale of mortgage loans	$	1,208		$	836		$	5,311		$	4,564
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		922			910			3,560			3,503
Amortization of mortgage servicing rights		(443	)		(356	)		(1,724	)		(1,620	)
Mortgage servicing rights valuation adjustments		241			75			123			266
		720			629			1,959			2,149
Total revenue from sale and servicing of mortgage loans	$	1,928		$	1,465		$	7,270		$	6,713

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Yield Analysis

First Defiance Financial Corp.

	Three Months Ended December 31,
	(dollars in thousands)
	2016							2015
	Average				Yield			Average				Yield
		Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,908,731	$	21,028		4.38	%	$	1,732,472	$	18,954		4.34	%
Securities		243,456		1,972		3.30	%(3)		236,361		2,107		3.64	%(3)
Interest Bearing Deposits		60,881		80		0.52	%		68,697		56		0.32	%
FHLB stock		13,800		139		4.01	%		13,801		139		4.00	%
Total interest-earning assets		2,226,868		23,219		4.16	%		2,051,331		21,256		4.12	%
Non-interest-earning assets		232,084							224,729
Total assets	$	2,458,952						$	2,276,060
Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	1,484,531	$	1,648		0.44	%	$	1,408,283	$	1,394		0.39	%
FHLB advances and other		95,631		348		1.45	%		50,419		214		1.68	%
Subordinated debentures		36,146		205		2.26	%		36,128		162		1.78	%
Notes payable		47,460		30		0.25	%		57,256		39		0.27	%
Total interest-bearing liabilities		1,663,768		2,231		0.53	%		1,552,086		1,809		0.46	%
Non-interest bearing deposits		470,100		-		-			415,113		-		-
Total including non-interest-bearing demand deposits		2,133,868		2,231		0.42	%		1,967,199		1,809		0.36	%
Other non-interest-bearing liabilities		32,783							29,669
Total liabilities		2,166,651							1,996,868
Stockholders' equity		292,301							279,192
Total liabilities and stockholders' equity	$	2,458,952						$	2,276,060
Net interest income; interest rate spread			$	20,988		3.63	%			$	19,447		3.66	%
Net interest margin (4)						3.76	%						3.77	%
Average interest-earning assets to average interest bearing liabilities						134	%						132	%

	Twelve Months Ended December 31,
	2016							2015
	Average				Yield			Average				Yield
	Balance		Interest(1)		Rate			Balance		Interest(1)		Rate
Interest-earning assets:
Loans receivable	$	1,853,419	$	80,423		4.34	%	$	1,687,413	$	73,544		4.36	%
Securities		233,407		7,871		3.48	%(3)		239,852		8,476		3.64	%(3)
Interest Bearing Deposits		67,420		367		0.54	%		59,410		169		0.27	%
FHLB stock		13,800		552		4.00	%		13,802		552		4.00	%
Total interest-earning assets		2,168,046		89,213		4.13	%		2,000,477		82,741		4.15	%
Non-interest-earning assets		229,393							222,389
Total assets	$	2,397,439						$	2,222,866
Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	1,463,890	$	6,261		0.43	%	$	1,399,619	$	5,341		0.38	%
FHLB advances and other		85,856		1,288		1.50	%		38,134		675		1.77	%
Subordinated debentures		36,141		753		2.09	%		36,129		613		1.70	%
Notes payable		52,826		138		0.26	%		54,619		152		0.28	%
Total interest-bearing liabilities		1,638,713		8,440		0.52	%		1,528,501		6,781		0.44	%
Non-interest bearing deposits		441,731		-		-			388,257		-		-
Total including non-interest-bearing demand deposits		2,080,444		8,440		0.41	%		1,916,758		6,781		0.35	%
Other non-interest-bearing liabilities		31,361							28,463
Total liabilities		2,111,805							1,945,221
Stockholders' equity		285,634							277,645
Total liabilities and stockholders' equity	$	2,397,439						$	2,222,866
Net interest income; interest rate spread			$	80,773		3.61	%			$	75,960		3.71	%
Net interest margin (4)						3.74	%						3.81	%
Average interest-earning assets to average interest bearing liabilities						132	%						131	%

(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) Securities yield = annualized interest income divided by the average balance of securities, excluding average unrealized gains/losses.

(4) Net interest margin is net interest income divided by average interest-earning assets.

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Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data)	4th Qtr 2016			3rd Qtr 2016			2nd Qtr 2016			1st Qtr 2016			4th Qtr 2015
Summary of Operations
Tax-equivalent interest income (1)	$	23,219		$	22,449		$	21,940		$	21,605		$	21,256
Interest expense		2,231			2,183			2,084			1,942			1,809
Tax-equivalent net interest income (1)		20,988			20,266			19,856			19,663			19,447
Provision for loan losses		(149	)		15			53			364			43
Tax-equivalent NII after provision for loan losses (1)		21,137			20,251			19,803			19,299			19,404
Investment securities gains, net of impairment		-			151			227			131			22
Non-interest income (excluding securities gains/losses)		8,293			8,375			8,348			8,505			7,708
Non-interest expense		18,180			18,292			17,347			17,274			17,347
Income taxes		3,436			2,994			3,307			3,017			2,744
Net income		7,365			7,045			7,264			7,169			6,563
Tax equivalent adjustment (1)		449			446			460			475			480
At Period End
Total assets	$	2,475,743		$	2,450,040		$	2,409,599		$	2,358,931		$	2,297,676
Earning assets		2,261,068			2,240,747			2,200,517			2,158,177			2,099,219
Loans		1,940,487			1,925,694			1,861,403			1,824,986			1,802,217
Allowance for loan losses		25,884			25,923			25,948			25,668			25,382
Deposits		1,981,628			1,927,686			1,920,270			1,871,157			1,836,137
Stockholders’ equity		293,018			292,138			286,616			280,418			280,197
Stockholders’ equity / assets		11.84	%		11.92	%		11.89	%		11.89	%		12.19	%
Goodwill		61,798			61,798			61,798			61,798			61,798
Average Balances
Total assets	$	2,458,952		$	2,425,535		$	2,391,064		$	2,314,203		$	2,276,060
Earning assets		2,226,868			2,194,170			2,162,574			2,088,582			2,051,331
Loans		1,908,731			1,879,760			1,828,984			1,796,200			1,732,472
Deposits and interest-bearing liabilities		2,133,868			2,103,054			2,079,442			2,005,395			1,967,199
Deposits		1,954,631			1,929,368			1,903,139			1,835,345			1,823,396
Stockholders’ equity		292,301			288,609			282,573			279,051			279,192
Stockholders’ equity / assets		11.89	%		11.90	%		11.82	%		12.06	%		12.27	%
Per Common Share Data
Net Income:
Basic	$	0.82		$	0.78		$	0.81		$	0.80		$	0.72
Diluted		0.81			0.78			0.80			0.79			0.71
Dividends		0.22			0.22			0.22			0.22			0.20
Market Value:
High	$	52.31		$	46.83		$	41.21		$	40.98		$	42.46
Low		36.91			35.90			37.53			34.80			35.01
Close		50.74			44.64			38.85			38.41			37.78
Common Book Value		32.62			32.53			31.95			31.29			30.78
Shares outstanding, end of period (in thousands)		8,983			8,980			8,971			8,961			9,102
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.76	%		3.69	%		3.71	%		3.80	%		3.77	%
Return on average assets		1.19	%		1.16	%		1.22	%		1.25	%		1.14	%
Return on average equity		10.02	%		9.71	%		10.34	%		10.33	%		9.33	%
Efficiency ratio (2)		62.09	%		63.87	%		61.51	%		61.32	%		63.88	%
Effective tax rate		31.81	%		29.82	%		31.28	%		29.62	%		29.48	%
Common dividend payout ratio (basic)		26.83	%		28.21	%		27.16	%		27.50	%		27.78	%

(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.

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Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data)	4th Qtr 2016			3rd Qtr 2016			2nd Qtr 2016			1st Qtr 2016			4th Qtr 2015
Loan Portfolio Composition
One to four family residential real estate	$	207,550		$	209,097		$	206,861		$	208,818		$	205,330
Construction		182,886			177,075			161,282			145,635			163,877
Commercial real estate		1,040,562			1,043,820			1,001,315			989,468			948,428
Commercial		469,055			456,099			428,599			412,911			419,349
Consumer finance		16,680			17,251			16,690			15,679			16,281
Home equity and improvement		118,429			118,165			116,685			116,856			116,962
Total loans		2,035,162			2,021,507			1,931,432			1,889,367			1,870,227
Less:
Undisbursed loan funds		93,355			94,552			68,850			63,267			66,902
Deferred loan origination fees		1,320			1,261			1,179			1,114			1,108
Allowance for loan loss		25,884			25,923			25,948			25,668			25,382
Net Loans	$	1,914,603		$	1,899,771		$	1,835,455		$	1,799,318		$	1,776,835
Allowance for loan loss activity
Beginning allowance	$	25,923		$	25,948		$	25,668		$	25,382		$	25,209
Provision for loan losses		(149	)		15			53			364			43
Credit loss charge-offs:
One to four family residential real estate		147			111			37			55			8
Commercial real estate		0			79			0			13			103
Commercial		234			26			18			336			0
Consumer finance		53			24			18			0			32
Home equity and improvement		98			74			66			30			10
Total charge-offs		532			314			139			434			153
Total recoveries		642			274			366			356			282
Net charge-offs (recoveries)		(110	)		40			(227	)		78			(129	)
Ending allowance	$	25,884		$	25,923		$	25,948		$	25,668		$	25,382
Credit Quality
Total non-performing loans (1)	$	14,348		$	18,198		$	16,423		$	17,707		$	16,261
Real estate owned (REO)		455			704			1,079			1,111			1,321
Total non-performing assets (2)	$	14,803		$	18,902		$	17,502		$	18,818		$	17,582
Net charge-offs (recoveries)		(110	)		40			(227	)		78			(129	)
Restructured loans, accruing (3)		10,544			9,113			9,648			11,284			11,178
Allowance for loan losses / loans		1.33	%		1.35	%		1.39	%		1.41	%		1.41	%
Allowance for loan losses / non-performing assets		174.86	%		137.14	%		148.26	%		136.40	%		144.36	%
Allowance for loan losses / non-performing loans		180.40	%		142.45	%		158.00	%		144.96	%		156.09	%
Non-performing assets / loans plus REO		0.76	%		0.98	%		0.94	%		1.03	%		0.97	%
Non-performing assets / total assets		0.60	%		0.77	%		0.73	%		0.80	%		0.77	%
Net charge-offs / average loans (annualized)		-0.02	%		0.01	%		-0.05	%		0.02	%		-0.03	%
Deposit Balances
Non-interest-bearing demand deposits	$	487,663		$	443,321		$	442,811		$	426,053		$	420,691
Interest-bearing demand deposits and money market		816,665			810,393			805,550			783,016			767,201
Savings deposits		243,369			241,016			240,316			233,546			219,655
Retail time deposits less than $250,000		400,080			399,749			399,494			401,350			403,902
Retail time deposits greater than $250,000		33,851			33,207			32,099			27,192			24,688
Total deposits	$	1,981,628		$	1,927,686		$	1,920,270		$	1,871,157		$	1,836,137

(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.

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Loan Delinquency Information
First Defiance Financial Corp.
(dollars in thousands)	Total Balance		Current		30 to 89 days past due		Non Accrual  Loans
December 31, 2016
One to four family residential real estate	$	207,550	$	203,624	$	998	$	2,928
Construction		182,886		182,886		-		-
Commercial real estate		1,040,562		1,030,833		137		9,592
Commercial		469,055		468,038		10		1,007
Consumer finance		16,680		16,438		151		91
Home equity and improvement		118,429		116,439		1,260		730
Total loans	$	2,035,162	$	2,018,258	$	2,556	$	14,348
September 30, 2016
One to four family residential real estate	$	209,097	$	205,471	$	706	$	2,920
Construction		177,075		177,075		-		-
Commercial real estate		1,043,820		1,032,260		258		11,302
Commercial		456,099		452,669		185		3,245
Consumer finance		17,251		17,048		190		13
Home equity and improvement		118,165		116,653		794		718
Total loans	$	2,021,507	$	2,001,176	$	2,133	$	18,198
December 31, 2015
One to four family residential real estate	$	205,330	$	201,806	$	914	$	2,610
Construction		163,877		163,877		-		-
Commercial real estate		948,428		937,844		736		9,848
Commercial		419,349		416,114		157		3,078
Consumer finance		16,281		16,215		30		36
Home equity and improvement		116,962		115,465		808		689
Total loans	$	1,870,227	$	1,851,321	$	2,645	$	16,261

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