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. ANNOUNCES
2017 FIRST QUARTER EARNINGS
| · | Earnings per share of $0.54 for 2017 first quarter, after merger related costs of $0.27 per share |
| · | Net income of $5.1 million for 2017 first quarter, after merger related costs of $2.5 million after tax |
| · | Net interest margin of 3.81% for the 2017 first quarter, compared to 3.80% in the first quarter of 2016 |
| · | Loan growth $298.5 million during the 2017 first quarter, including $285.7 million from acquisition |
| · | Deposit growth $392.2 million during the 2017 first quarter, including $308.0 million from acquisition |
| · | Non-performing assets to total assets down to 0.54% at 2017 first quarter-end from 0.80% at 2016 first quarter-end |
DEFIANCE, OHIO (April 17, 2017)– First Defiance Financial Corp. (NASDAQ: FDEF) announced today that earnings for the first quarter of 2017 were $5.1 million, or $0.54 per diluted common share, which included the acquisition and operations of Commercial Bancshares, Inc. and its banking subsidiary, Commercial Savings Bank (collectively “CSB”), at February 24, 2017. These results included merger and conversion expenses related to the acquisition of $3.6 million, which had an after tax impact of $2.5 million, or $0.27 per diluted share.
In addition, first quarter 2017 results reflected the impact of the purchase of a bank owned life insurance policy including a tax-free value enhancement gain of $1.5 million and the surrender of a bank owned life insurance policy which added $1.7 million to income tax expense. Together, these transactions reduced net income approximately $0.2 million, or $0.02 per diluted share.
For the comparable period last year, net income was $7.2 million, or $0.79 per diluted share.
“We are very pleased with our strong operating performance for the first quarter and our successful completion of the merger and integration of CSB late in the quarter,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “While the inclusion of CSB’s financials in the current quarter’s results impacts comparison of the quarter’s operating results, we were encouraged by our organic loan and deposit growth and the continued strength of our net interest margin. We look forward to building relationships in our new markets and realizing the benefits from the merger in our future results.”
Net interest income up compared to first quarter 2016
Net interest income of $21.6 million in the first quarter of 2017 was up from $19.2 million in the first quarter of 2016. Net interest income grew $2.5 million over the prior year’s first quarter including approximately $945,000 from the acquisition of CSB completed during the first quarter 2017. Net interest margin was 3.81% for the first quarter of 2017, up from 3.76% in the fourth quarter of 2016, and up from 3.80% in the first quarter of 2016. Yield on interest earning assets were up slightly at 4.22% in the first quarter of 2017 compared to 4.18% in the first quarter of 2016. The cost of interest-bearing liabilities increased by 5 basis points in the first quarter of 2017 to 0.54% from 0.49% in the first quarter of 2016.
“The acquisition of CSB, particularly with its profitable earning asset mix and low cost deposit funding, supplemented our balance sheet very nicely as net interest income rose 12.8% over the first quarter last year,” said Hileman. “Our net interest margin showed improvement in the first quarter with the rise in interest rates and remains well positioned for future rate movements.”
Non-interest income up from first quarter 2016
First Defiance’s non-interest income for the first quarter of 2017 was $10.5 million compared with $8.6 million in the first quarter of 2016. The first quarter 2017 included a $1.5 million enhancement value gain related to the purchase of bank owned life insurance, while the first quarter 2016 included net securities gains of $131,000 and net gains on the sale of OREO of $317,000.
Mortgage banking income increased to $1.7 million in the first quarter of 2017, up from $1.5 million in the first quarter of 2016, mostly due to higher mortgage volumes this year compared to a year ago. Gains from the sale of mortgage loans increased in the first quarter of 2017 to $1.1 million from $1.0 million in the first quarter of 2016. Mortgage loan servicing revenue was $934,000 in the first quarter of 2017, up slightly from $877,000 in the first quarter of 2016. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $33,000 in the first quarter of 2017 compared with a negative adjustment of $21,000 in the first quarter of 2016.
For the first quarter 2017, service fees and other charges were $2.8 million, up from $2.6 million in the first quarter of 2016; and commissions from the sale of insurance products were $3.5 million, up from $3.1 million in the first quarter of 2016. The first quarter typically includes contingent revenues, bonuses paid by insurance carriers when the Company achieves certain loss ratios or growth targets. In the first quarter of 2017, First Defiance’s insurance subsidiary, First Insurance Group, earned $1.2 million of contingent income, compared to $799,000 during the first quarter of 2016. Trust income was $450,000 in the first quarter of 2017, up from $427,000 in the first quarter of 2016.
“First quarter total non-interest income was up significantly from a year ago due to growth in all of our key business lines plus an enhancement to our bank-owned life insurance revenues,” said Hileman. “Increases in service fees, mortgage banking, insurance commissions and trust income all contributed to our improvement this quarter.”
Non-interest expenses up from first quarter 2016
Total non-interest expense was $23.1 million in the first quarter of 2017, up $5.8 million from $17.3 million in the first quarter of 2016. The first quarter 2017 included expenses of $3.6 million related to the CSB merger and conversion. The remainder of the increase was mostly due to the operating costs for CSB from February 24 to the end of the quarter. Compensation and benefits increased to $14.3 million in the first quarter of 2017 compared to $10.2 million in the first quarter of 2016. The increase in compensation and benefits from a year ago is mainly due to $2.8 million of merger costs to settle employment and benefit agreements and for personnel expenses related to operating the new CSB locations. Data processing cost was $1.9 million in the first quarter of 2017, up $479,000 from the first quarter of 2016 and included $124,000 of CSB merger and conversion related costs. Other non-interest expense of $4.0 million in the first quarter of 2017 increased $1.1 million from the first quarter of 2016 and included $667,000 of CSB merger and conversion related costs.
Credit quality
Non-performing loans totaled $15.1 million at March 31, 2017, a decrease from $17.7 million at March 31, 2016. In addition, First Defiance had $705,000 of OREO at March 31, 2017, compared to $1.1 million at March 31, 2016. Accruing troubled debt restructured loans were $9.8 million at March 31, 2017, compared with $11.3 million at March 31, 2016.
The allowance for loan loss as a percentage of total loans was 1.15% at March 31, 2017 compared with 1.41% at March 31, 2016. The decrease in the allowance for loan loss as a percentage of total loans was primarily attributable to the CSB acquisition. The CSB loans acquired were recorded at fair value with purchase accounting adjustment discounting the loan balance instead of an allowance for loan losses. Excluding the loans acquired from CSB the allowance for loan loss as a percentage of loans would be 1.32% at March 31, 2017. For the CSB loans acquired the discount recorded totaled $5.1 million, or 1.8% of total CSB loans at acquisition.
The first quarter 2017 results include a provision for loan losses of $55,000 compared with $364,000 for the same period in 2016, while net charge-offs totaled $190,000 in the current quarter in comparison to net charge-offs of $78,000 in the first quarter of 2016.
“Asset quality remained steady and strong in the first quarter,” said Hileman. “While the accounting rules for the acquisition affect some of our key asset quality measures, the Commercial Savings Bank loan portfolio had many similarities to ours and we are very confident in our credit strength as we pursue our growth strategies going forward.”
Total assets at $2.9 billion
Total assets at March 31, 2017, were $2.93 billion compared to $2.48 billion at December 31, 2016 and $2.36 billion at March 31, 2016. The increase in the current quarter is primarily due to the acquisition of CSB effective February 24, 2017, which added $369.5 million to total assets, net of $12.3 million paid in cash, at consummation.
Net loans receivable (excluding loans held for sale) were $2.21 billion at March 31, 2017, compared to $1.91 billion at December 31, 2016, and $1.80 billion at March 31, 2016. In the current quarter, the acquisition of CSB added $285.7 million to the loan portfolio. At March 31, 2017, excluding the CSB acquired loans, net loans receivable grew $128.1 million, or 7.1% from a year ago.
Also, at March 31, 2017, goodwill and other intangible assets totaled $97.1 million compared to $63.1 million at December 31, 2016 and $63.5 million at March 31, 2016. The increase in the current quarter was attributable to the acquisition of CSB which added $34.2 million to goodwill and intangibles.
Total deposits at March 31, 2017 were $2.37 billion compared with $1.98 billion at December 31, 2016, and $1.87 billion at March 31, 2016. In the current quarter, the acquisition of CSB added $308.0 million to total deposits. At March 31, 2017, excluding the CSB acquired deposits, total deposits grew $194.6 million, or 10.4% from a year ago.
Total stockholders’ equity was $354.2 million at March 31, 2017, compared to $293.0 million at December 31, 2016, and $280.4 million at March 31, 2016. The acquisition of CSB during the current quarter added $56.5 million to total equity.
Acquisition of Corporate One Benefits Agency, Inc.
On April 13, 2017, First Defiance and Corporate One Benefits Agency, Inc. (“Corporate One”) jointly announced the signing of an agreement under which First Defiance acquired the business of Corporate One. Corporate One will be part of First Defiance’s subsidiary insurance agency, First Insurance Group.
Corporate One is a full-service employee benefits consulting organization founded in 1996 with offices located in Archbold, Findlay, Fostoria and Tiffin, Ohio. Corporate One consults employers to better manage their employee benefit programs to effectively lead them into the future. The transaction will enhance employee benefit offerings and expand First Insurance Group’s presence into adjacent markets in northwest Ohio.
Dividend to be paid May 26
The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable May 26, 2017, to shareholders of record at the close of business on May 19, 2017. The dividend represents an annual dividend of 2.00 percent based on the First Defiance common stock closing price on April 14, 2017. First Defiance has approximately 10,145,303 common shares outstanding.
Conference call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, April 18, 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/fdef170418.html.
The replay of the conference call Webcast will be available atwww.fdef.com until April 18, 2018, at 9:00 a.m. ET.
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 43 full-service branches and numerous ATM locations in northwest and central 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 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, 2016. 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 March 31, 2017 consolidated financial statements as part of its Quarterly Report on Form 10-Q 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.
Consolidated Balance Sheets (Unaudited)
First Defiance Financial Corp.
| | | | | | | |
| | | March 31, | | | December 31, | |
| (in thousands) | | 2017 | | | 2016 | |
| | | | | | | |
| Assets | | | | | | |
| Cash and cash equivalents | | | | | | |
| Cash and amounts due from depository institutions | | $ | 53,998 | | | $ | 53,003 | |
| Interest-bearing deposits | | | 116,000 | | | | 46,000 | |
| | | | 169,998 | | | | 99,003 | |
| Securities | | | | | | | | |
| Available-for sale, carried at fair value | | | 260,601 | | | | 250,992 | |
| Held-to-maturity, carried at amortized cost | | | 771 | | | | 184 | |
| | | | 261,372 | | | | 251,176 | |
| | | | | | | | | |
| Loans | | | 2,238,864 | | | | 1,940,487 | |
| Allowance for loan losses | | | (25,749 | ) | | | (25,884 | ) |
| Loans, net | | | 2,213,115 | | | | 1,914,603 | |
| Loans held for sale | | | 7,955 | | | | 9,607 | |
| Mortgage servicing rights | | | 9,672 | | | | 9,595 | |
| Accrued interest receivable | | | 8,872 | | | | 6,760 | |
| Federal Home Loan Bank stock | | | 15,992 | | | | 13,798 | |
| Bank Owned Life Insurance | | | 64,968 | | | | 52,817 | |
| Office properties and equipment | | | 42,824 | | | | 36,958 | |
| Real estate and other assets held for sale | | | 705 | | | | 455 | |
| Goodwill | | | 88,589 | | | | 61,798 | |
| Core deposit and other intangibles | | | 8,498 | | | | 1,336 | |
| Deferred Taxes | | | 823 | | | | 2,212 | |
| Other assets | | | 36,091 | | | | 17,479 | |
| Total Assets | | $ | 2,929,474 | | | $ | 2,477,597 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
| Non-interest-bearing deposits | | $ | 579,943 | | | $ | 487,663 | |
| Interest-bearing deposits | | | 1,793,846 | | | | 1,493,965 | |
| Total deposits | | | 2,373,789 | | | | 1,981,628 | |
| Advances from Federal Home Loan Bank | | | 105,104 | | | | 103,943 | |
| Notes payable and other interest-bearing liabilities | | | 24,891 | | | | 31,816 | |
| Subordinated debentures | | | 36,083 | | | | 36,083 | |
| Advance payments by borrowers for tax and insurance | | | 1,840 | | | | 2,650 | |
| Deferred taxes | | | - | | | | - | |
| Other liabilities | | | 33,576 | | | | 28,459 | |
| Total Liabilities | | | 2,575,283 | | | | 2,184,579 | |
| Stockholders’ Equity | | | | | | | | |
| Preferred stock | | | - | | | | - | |
| Common stock, net | | | 127 | | | | 127 | |
| Additional paid-in-capital | | | 160,397 | | | | 126,390 | |
| Accumulated other comprehensive income | | | 1,242 | | | | 215 | |
| Retained earnings | | | 243,446 | | | | 240,592 | |
| Treasury stock, at cost | | | (51,021 | ) | | | (74,306 | ) |
| Total stockholders’ equity | | | 354,191 | | | | 293,018 | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,929,474 | | | $ | 2,477,597 | |
Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
| | | Three Months Ended | |
| | | March 31, | |
| (in thousands, except per share amounts) | | 2017 | | | 2016 | |
| Interest Income: | | | | | | |
| Loans | | $ | 21,969 | | | $ | 19,312 | |
| Investment securities | | | 1,756 | | | | 1,630 | |
| Interest-bearing deposits | | | 145 | | | | 49 | |
| FHLB stock dividends | | | 166 | | | | 139 | |
| Total interest income | | | 24,036 | | | | 21,130 | |
| Interest Expense: | | | | | | | | |
| Deposits | | | 1,796 | | | | 1,433 | |
| FHLB advances and other | | | 366 | | | | 297 | |
| Subordinated debentures | | | 215 | | | | 175 | |
| Notes Payable | | | 14 | | | | 37 | |
| Total interest expense | | | 2,391 | | | | 1,942 | |
| Net interest income | | | 21,645 | | | | 19,188 | |
| Provision for loan losses | | | 55 | | | | 364 | |
| Net interest income after provision for loan losses | | | 21,590 | | | | 18,824 | |
| Non-interest Income: | | | | | | | | |
| Service fees and other charges | | | 2,760 | | | | 2,644 | |
| Mortgage banking income | | | 1,738 | | | | 1,539 | |
| Gain on sale of non-mortgage loans | | | - | | | | 45 | |
| Gain on sale of securities | | | - | | | | 131 | |
| Insurance commissions | | | 3,457 | | | | 3,136 | |
| Trust income | | | 450 | | | | 427 | |
| Income from Bank Owned Life Insurance | | | 1,823 | | | | 231 | |
| Other non-interest income | | | 321 | | | | 483 | |
| Total Non-interest Income | | | 10,549 | | | | 8,636 | |
| Non-interest Expense: | | | | | | | | |
| Compensation and benefits | | | 14,335 | | | | 10,185 | |
| Occupancy | | | 1,837 | | | | 1,785 | |
| FDIC insurance premium | | | 290 | | | | 327 | |
| Financial institutions tax | | | 480 | | | | 446 | |
| Data processing | | | 1,939 | | | | 1,460 | |
| Amortization of intangibles | | | 232 | | | | 157 | |
| Other non-interest expense | | | 4,029 | | | | 2,914 | |
| Total Non-interest Expense | | | 23,142 | | | | 17,274 | |
| Income before income taxes | | | 8,997 | | | | 10,186 | |
| Income taxes | | | 3,857 | | | | 3,017 | |
| Net Income | | $ | 5,140 | | | $ | 7,169 | |
| | | | | | | | | |
| | | | | | | | | |
| Earnings per common share: | | | | | | | | |
| Basic | | $ | 0.54 | | | $ | 0.80 | |
| Diluted | | $ | 0.54 | | | $ | 0.79 | |
| | | | | | | | | |
| Average Shares Outstanding: | | | | | | | | |
| Basic | | | 9,435 | | | | 8,994 | |
| Diluted | | | 9,490 | | | | 9,064 | |
| | | | | | | | | |
Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.
| | | Three Months Ended | |
| | | March 31, | |
| (dollars in thousands, except per share data) | | 2017 | | | 2016 | | | % change | |
| Summary of Operations | | | | | | | | | |
| | | | | | | | | | |
| Tax-equivalent interest income (1) | | $ | 24,505 | | | $ | 21,605 | | | | 13.4 | % |
| Interest expense | | | 2,391 | | | | 1,942 | | | | 23.1 | |
| Tax-equivalent net interest income (1) | | | 22,114 | | | | 19,663 | | | | 12.5 | |
| Provision for loan losses | | | 55 | | | | 364 | | | | NM | |
| Tax-equivalent NII after provision for loan loss (1) | | | 22,059 | | | | 19,299 | | | | 14.3 | |
| Investment Securities gains | | | - | | | | 131 | | | | NM | |
| Non-interest income (excluding securities gains/losses) | | | 10,549 | | | | 8,505 | | | | 24.0 | |
| Non-interest expense | | | 23,142 | | | | 17,274 | | | | 34.0 | |
| Income taxes | | | 3,857 | | | | 3,017 | | | | 27.8 | |
| Net Income | | | 5,140 | | | | 7,169 | | | | (28.3 | ) |
| Tax equivalent adjustment (1) | | | 469 | | | | 475 | | | | (1.3 | ) |
| At Period End | | | | | | | | | | | | |
| Assets | | | 2,929,474 | | | | 2,358,931 | | | | 24.2 | |
| Earning assets | | | 2,640,183 | | | | 2,158,177 | | | | 22.3 | |
| Loans | | | 2,238,864 | | | | 1,824,986 | | | | 22.7 | |
| Allowance for loan losses | | | 25,749 | | | | 25,668 | | | | 0.3 | |
| Deposits | | | 2,373,789 | | | | 1,871,157 | | | | 26.9 | |
| Stockholders’ equity | | | 354,191 | | | | 280,418 | | | | 26.3 | |
| Average Balances | | | | | | | | | | | | |
| Assets | | | 2,622,402 | | | | 2,314,203 | | | | 13.3 | |
| Earning assets | | | 2,355,544 | | | | 2,088,582 | | | | 12.8 | |
| Loans | | | 2,026,067 | | | | 1,796,200 | | | | 12.8 | |
| Deposits and interest-bearing liabilities | | | 2,275,724 | | | | 2,005,395 | | | | 13.5 | |
| Deposits | | | 2,109,637 | | | | 1,835,345 | | | | 14.9 | |
| Stockholders’ equity | | | 314,442 | | | | 279,051 | | | | 12.7 | |
| Stockholders’ equity / assets | | | 11.99 | % | | | 12.06 | % | | | (0.6 | ) |
| Per Common Share Data | | | | | | | | | | | | |
| Net Income | | | | | | | | | | | | |
| Basic | | $ | 0.54 | | | $ | 0.80 | | | | (32.5 | ) |
| Diluted | | | 0.54 | | | | 0.79 | | | | (31.6 | ) |
| Dividends | | | 0.25 | | | | 0.22 | | | | 13.6 | |
| Market Value: | | | | | | | | | | | | |
| High | | $ | 51.15 | | | $ | 40.98 | | | | 24.8 | |
| Low | | | 46.27 | | | | 34.80 | | | | 33.0 | |
| Close | | | 49.51 | | | | 38.41 | | | | 28.9 | |
| Common Book Value | | | 34.92 | | | | 31.29 | | | | 11.6 | |
| Tangible Common Book Value (1) | | | 25.35 | | | | 24.21 | | | | 4.7 | |
| Shares outstanding, end of period (000) | | | 10,143 | | | | 8,961 | | | | 13.2 | |
| Performance Ratios (annualized) | | | | | | | | | | | | |
| Tax-equivalent net interest margin (2) | | | 3.81 | % | | | 3.80 | % | | | 0.3 | |
| Return on average assets | | | 0.79 | % | | | 1.25 | % | | | (36.2 | ) |
| Return on average equity | | | 6.63 | % | | | 10.33 | % | | | (35.8 | ) |
| Efficiency ratio (3) | | | 70.85 | % | | | 61.32 | % | | | 15.5 | |
| Effective tax rate | | | 42.87 | % | | | 29.62 | % | | | 44.7 | |
| Dividend payout ratio (basic) | | | 46.30 | % | | | 27.50 | % | | | 68.4 | |
| | | | | | | | | | | | | |
| (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 |
Income from Mortgage Banking
Revenue from sales and servicing of mortgage loans consisted of the following:
| | | Three Months Ended | |
| | | March 31, | |
| (dollars in thousands) | | 2017 | | | 2016 | |
| | | | | | | |
| Gain from sale of mortgage loans | | $ | 1,083 | | | $ | 994 | |
| Mortgage loan servicing revenue (expense): | | | | | | | | |
| Mortgage loan servicing revenue | | | 934 | | | | 877 | |
| Amortization of mortgage servicing rights | | | (312 | ) | | | (311 | ) |
| Mortgage servicing rights valuation adjustments | | | 33 | | | | (21 | ) |
| | | | 655 | | | | 545 | |
| Total revenue from sale and servicing of mortgage loans | | $ | 1,738 | | | $ | 1,539 | |
| | | | | | | | | |
Yield Analysis
First Defiance Financial Corp.
| | | Three Months Ended March 31, | |
| | | (dollars in thousands) | |
| | | 2017 | | | 2016 | |
| | | Average | | | | | | Yield | | | Average | | | | | | Yield | |
| | | Balance | | | Interest(1) | | | Rate(2) | | | Balance | | | Interest(1) | | | Rate(2) | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | |
| Loans receivable | | $ | 2,026,067 | | | $ | 22,020 | | | | 4.41 | % | | $ | 1,796,200 | | | $ | 19,363 | | | | 4.34 | % |
| Securities | | | 254,842 | | | | 2,174 | | | | 3.48 | %(3) | | | 233,815 | | | | 2,054 | | | | 3.65 | %(3) |
| Interest Bearing Deposits | | | 60,083 | | | | 145 | | | | 0.98 | % | | | 44,766 | | | | 49 | | | | 0.44 | % |
| FHLB stock | | | 14,552 | | | | 166 | | | | 4.63 | % | | | 13,801 | | | | 139 | | | | 4.05 | % |
| Total interest-earning assets | | | 2,355,544 | | | | 24,505 | | | | 4.22 | % | | | 2,088,582 | | | | 21,605 | | | | 4.18 | % |
| Non-interest-earning assets | | | 266,858 | | | | | | | | | | | | 225,621 | | | | | | | | | |
| Total assets | | $ | 2,622,402 | | | | | | | | | | | $ | 2,314,203 | | | | | | | | | |
| Deposits and Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest bearing deposits | | $ | 1,626,742 | | | $ | 1,796 | | | | 0.45 | % | | $ | 1,420,479 | | | $ | 1,433 | | | | 0.41 | % |
| FHLB advances and other | | | 104,277 | | | | 366 | | | | 1.42 | % | | | 78,670 | | | | 297 | | | | 1.52 | % |
| Subordinated debentures | | | 36,150 | | | | 215 | | | | 2.41 | % | | | 36,137 | | | | 175 | | | | 1.95 | % |
| Notes payable | | | 25,660 | | | | 14 | | | | 0.22 | % | | | 55,243 | | | | 37 | | | | 0.27 | % |
| Total interest-bearing liabilities | | | 1,792,829 | | | | 2,391 | | | | 0.54 | % | | | 1,590,529 | | | | 1,942 | | | | 0.49 | % |
| Non-interest bearing deposits | | | 482,895 | | | | - | | | | - | | | | 414,866 | | | | - | | | | - | |
| Total including non-interest-bearing demand deposits | | | 2,275,724 | | | | 2,391 | | | | 0.43 | % | | | 2,005,395 | | | | 1,942 | | | | 0.39 | % |
| Other non-interest-bearing liabilities | | | 32,236 | | | | | | | | | | | | 29,757 | | | | | | | | | |
| Total liabilities | | | 2,307,960 | | | | | | | | | | | | 2,035,152 | | | | | | | | | |
| Stockholders' equity | | | 314,442 | | | | | | | | | | | | 279,051 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 2,622,402 | | | | | | | | | | | $ | 2,314,203 | | | | | | | | | |
| Net interest income; interest rate spread | | | | | | $ | 22,114 | | | | 3.68 | % | | | | | | $ | 19,663 | | | | 3.69 | % |
| Net interest margin (4) | | | | | | | | | | | 3.81 | % | | | | | | | | | | | 3.80 | % |
| Average interest-earning assets to average interest bearing liabilities | | | | | | | | | | | 131 | % | | | | | | | | | | | 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%. |
| (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. |
Selected Quarterly Information
First Defiance Financial Corp.
| | | | | | | | | | | | | | | | |
| (dollars in thousands, except per share data) | | 1st Qtr 2017 | | | 4th Qtr 2016 | | | 3rd Qtr 2016 | | | 2nd Qtr 2016 | | | 1st Qtr 2016 | |
| Summary of Operations | | | | | | | | | | | | | | | |
| Tax-equivalent interest income (1) | | $ | 24,505 | | | $ | 23,219 | | | $ | 22,449 | | | $ | 21,940 | | | $ | 21,605 | |
| Interest expense | | | 2,391 | | | | 2,231 | | | | 2,183 | | | | 2,084 | | | | 1,942 | |
| Tax-equivalent net interest income (1) | | | 22,114 | | | | 20,988 | | | | 20,266 | | | | 19,856 | | | | 19,663 | |
| Provision for loan losses | | | 55 | | | | (149 | ) | | | 15 | | | | 53 | | | | 364 | |
| Tax-equivalent NII after provision for loan losses (1) | | | 22,059 | | | | 21,137 | | | | 20,251 | | | | 19,803 | | | | 19,299 | |
| Investment securities gains, net of impairment | | | - | | | | - | | | | 151 | | | | 227 | | | | 131 | |
| Non-interest income (excluding securities gains/losses) | | | 10,549 | | | | 8,293 | | | | 8,375 | | | | 8,348 | | | | 8,505 | |
| Non-interest expense | | | 23,142 | | | | 18,180 | | | | 18,292 | | | | 17,347 | | | | 17,274 | |
| Income taxes | | | 3,857 | | | | 3,436 | | | | 2,994 | | | | 3,307 | | | | 3,017 | |
| Net income | | | 5,140 | | | | 7,365 | | | | 7,045 | | | | 7,264 | | | | 7,169 | |
| Tax equivalent adjustment (1) | | | 469 | | | | 449 | | | | 446 | | | | 460 | | | | 475 | |
| At Period End | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 2,929,474 | | | $ | 2,477,151 | | | $ | 2,450,040 | | | $ | 2,409,599 | | | $ | 2,358,931 | |
| Earning assets | | | 2,640,183 | | | | 2,261,068 | | | | 2,240,747 | | | | 2,200,517 | | | | 2,158,177 | |
| Loans | | | 2,238,864 | | | | 1,940,487 | | | | 1,925,694 | | | | 1,861,403 | | | | 1,824,986 | |
| Allowance for loan losses | | | 25,749 | | | | 25,884 | | | | 25,923 | | | | 25,948 | | | | 25,668 | |
| Deposits | | | 2,373,789 | | | | 1,981,628 | | | | 1,927,686 | | | | 1,920,270 | | | | 1,871,157 | |
| Stockholders’ equity | | | 354,191 | | | | 293,018 | | | | 292,138 | | | | 286,616 | | | | 280,418 | |
| Stockholders’ equity / assets | | | 12.09 | % | | | 11.83 | % | | | 11.92 | % | | | 11.89 | % | | | 11.89 | % |
| Goodwill | | | 88,589 | | | | 61,798 | | | | 61,798 | | | | 61,798 | | | | 61,798 | |
| Average Balances | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 2,622,402 | | | $ | 2,458,952 | | | $ | 2,425,535 | | | $ | 2,391,064 | | | $ | 2,314,203 | |
| Earning assets | | | 2,355,544 | | | | 2,226,868 | | | | 2,194,170 | | | | 2,162,574 | | | | 2,088,582 | |
| Loans | | | 2,026,067 | | | | 1,908,731 | | | | 1,879,760 | | | | 1,828,984 | | | | 1,796,200 | |
| Deposits and interest-bearing liabilities | | | 2,275,724 | | | | 2,133,868 | | | | 2,103,054 | | | | 2,079,442 | | | | 2,005,395 | |
| Deposits | | | 2,109,637 | | | | 1,954,631 | | | | 1,929,368 | | | | 1,903,139 | | | | 1,835,345 | |
| Stockholders’ equity | | | 314,442 | | | | 292,301 | | | | 288,609 | | | | 282,573 | | | | 279,051 | |
| Stockholders’ equity / assets | | | 11.99 | % | | | 11.89 | % | | | 11.90 | % | | | 11.82 | % | | | 12.06 | % |
| Per Common Share Data | | | | | | | | | | | | | | | | | | | | |
| Net Income: | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.54 | | | $ | 0.82 | | | $ | 0.78 | | | $ | 0.81 | | | $ | 0.80 | |
| Diluted | | | 0.54 | | | | 0.81 | | | | 0.78 | | | | 0.80 | | | | 0.79 | |
| Dividends | | | 0.25 | | | | 0.22 | | | | 0.22 | | | | 0.22 | | | | 0.22 | |
| Market Value: | | | | | | | | | | | | | | | | | | | | |
| High | | $ | 51.15 | | | $ | 52.31 | | | $ | 46.83 | | | $ | 41.21 | | | $ | 40.98 | |
| Low | | | 46.27 | | | | 36.91 | | | | 35.90 | | | | 37.53 | | | | 34.80 | |
| Close | | | 49.51 | | | | 50.74 | | | | 44.64 | | | | 38.85 | | | | 38.41 | |
| Common Book Value | | | 34.92 | | | | 32.62 | | | | 32.53 | | | | 31.95 | | | | 31.29 | |
| Shares outstanding, end of period (in thousands) | | | 10,143 | | | | 8,983 | | | | 8,980 | | | | 8,971 | | | | 8,961 | |
| Performance Ratios (annualized) | | | | | | | | | | | | | | | | | | | | |
| Tax-equivalent net interest margin (1) | | | 3.81 | % | | | 3.76 | % | | | 3.69 | % | | | 3.71 | % | | | 3.80 | % |
| Return on average assets | | | 0.79 | % | | | 1.19 | % | | | 1.16 | % | | | 1.22 | % | | | 1.25 | % |
| Return on average equity | | | 6.63 | % | | | 10.02 | % | | | 9.71 | % | | | 10.34 | % | | | 10.33 | % |
| Efficiency ratio (2) | | | 70.85 | % | | | 62.09 | % | | | 63.87 | % | | | 61.51 | % | | | 61.32 | % |
| Effective tax rate | | | 42.87 | % | | | 31.81 | % | | | 29.82 | % | | | 31.28 | % | | | 29.62 | % |
| Common dividend payout ratio (basic) | | | 46.30 | % | | | 26.83 | % | | | 28.21 | % | | | 27.16 | % | | | 27.50 | % |
| (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. |
Selected Quarterly Information
First Defiance Financial Corp.
| | | | | | | | | | | | | | | | |
| (dollars in thousands, except per share data) | | 1st Qtr 2017 | | | 4th Qtr 2016 | | | 3rd Qtr 2016 | | | 2nd Qtr 2016 | | | 1st Qtr 2016 | |
| Loan Portfolio Composition | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 276,931 | | | $ | 207,550 | | | $ | 209,097 | | | $ | 206,861 | | | $ | 208,818 | |
| Construction | | | 199,724 | | | | 182,886 | | | | 177,075 | | | | 161,282 | | | | 145,635 | |
| Commercial real estate | | | 1,193,906 | | | | 1,040,562 | | | | 1,043,820 | | | | 1,001,315 | | | | 989,468 | |
| Commercial | | | 504,366 | | | | 469,055 | | | | 456,099 | | | | 428,599 | | | | 412,911 | |
| Consumer finance | | | 27,696 | | | | 16,680 | | | | 17,251 | | | | 16,690 | | | | 15,679 | |
| Home equity and improvement | | | 132,965 | | | | 118,429 | | | | 118,165 | | | | 116,685 | | | | 116,856 | |
| Total loans | | | 2,335,588 | | | | 2,035,162 | | | | 2,021,507 | | | | 1,931,432 | | | | 1,889,367 | |
| Less: | | | | | | | | | | | | | | | | | | | | |
| Undisbursed loan funds | | | 95,460 | | | | 93,355 | | | | 94,552 | | | | 68,850 | | | | 63,267 | |
| Deferred loan origination fees | | | 1,264 | | | | 1,320 | | | | 1,261 | | | | 1,179 | | | | 1,114 | |
| Allowance for loan loss | | | 25,749 | | | | 25,884 | | | | 25,923 | | | | 25,948 | | | | 25,668 | |
| Net Loans | | $ | 2,213,115 | | | $ | 1,914,603 | | | $ | 1,899,771 | | | $ | 1,835,455 | | | $ | 1,799,318 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan loss activity | | | | | | | | | | | | | | | | | | | | |
| Beginning allowance | | $ | 25,884 | | | $ | 25,923 | | | $ | 25,948 | | | $ | 25,668 | | | $ | 25,382 | |
| Provision for loan losses | | | 55 | | | | (149 | ) | | | 15 | | | | 53 | | | | 364 | |
| Credit loss charge-offs: | | | | | | | | | | | | | | | | | | | | |
| One to four family residential real estate | | | 49 | | | | 147 | | | | 111 | | | | 37 | | | | 55 | |
| Commercial real estate | | | 290 | | | | 0 | | | | 79 | | | | 0 | | | | 13 | |
| Commercial | | | - | | | | 234 | | | | 26 | | | | 18 | | | | 336 | |
| Consumer finance | | | 71 | | | | 53 | | | | 24 | | | | 18 | | | | 0 | |
| Home equity and improvement | | | 54 | | | | 98 | | | | 74 | | | | 66 | | | | 30 | |
| Total charge-offs | | | 464 | | | | 532 | | | | 314 | | | | 139 | | | | 434 | |
| Total recoveries | | | 274 | | | | 642 | | | | 274 | | | | 366 | | | | 356 | |
| Net charge-offs (recoveries) | | | 190 | | | | (110 | ) | | | 40 | | | | (227 | ) | | | 78 | |
| Ending allowance | | $ | 25,749 | | | $ | 25,884 | | | $ | 25,923 | | | $ | 25,948 | | | $ | 25,668 | |
| | | | | | | | | | | | | | | | | | | | | |
| Credit Quality | | | | | | | | | | | | | | | | | | | | |
| Total non-performing loans (1) | | $ | 15,074 | | | $ | 14,348 | | | $ | 18,198 | | | $ | 16,423 | | | $ | 17,707 | |
| Real estate owned (REO) | | | 705 | | | | 455 | | | | 704 | | | | 1,079 | | | | 1,111 | |
| Total non-performing assets (2) | | $ | 15,779 | | | $ | 14,803 | | | $ | 18,902 | | | $ | 17,502 | | | $ | 18,818 | |
| Net charge-offs (recoveries) | | | 190 | | | | (110 | ) | | | 40 | | | | (227 | ) | | | 78 | |
| | | | | | | | | | | | | | | | | | | | | |
| Restructured loans, accruing (3) | | | 9,814 | | | | 10,544 | | | | 9,113 | | | | 9,648 | | | | 11,284 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses / loans | | | 1.15 | % | | | 1.33 | % | | | 1.35 | % | | | 1.39 | % | | | 1.41 | % |
| Allowance for loan losses / non-performing assets | | | 163.19 | % | | | 174.86 | % | | | 137.14 | % | | | 148.26 | % | | | 136.40 | % |
| Allowance for loan losses / non-performing loans | | | 170.82 | % | | | 180.40 | % | | | 142.45 | % | | | 158.00 | % | | | 144.96 | % |
| Non-performing assets / loans plus REO | | | 0.70 | % | | | 0.76 | % | | | 0.98 | % | | | 0.94 | % | | | 1.03 | % |
| Non-performing assets / total assets | | | 0.54 | % | | | 0.60 | % | | | 0.77 | % | | | 0.73 | % | | | 0.80 | % |
| Net charge-offs / average loans (annualized) | | | 0.04 | % | | | -0.02 | % | | | 0.01 | % | | | -0.05 | % | | | 0.02 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Deposit Balances | | | | | | | | | | | | | | | | | | | | |
| Non-interest-bearing demand deposits | | $ | 579,943 | | | $ | 487,663 | | | $ | 443,321 | | | $ | 442,811 | | | $ | 426,053 | |
| Interest-bearing demand deposits and money market | | | 973,459 | | | | 816,665 | | | | 810,393 | | | | 805,550 | | | | 783,016 | |
| Savings deposits | | | 288,498 | | | | 243,369 | | | | 241,016 | | | | 240,316 | | | | 233,546 | |
| Retail time deposits less than $250,000 | | | 490,953 | | | | 400,080 | | | | 399,749 | | | | 399,494 | | | | 401,350 | |
| Retail time deposits greater than $250,000 | | | 40,936 | | | | 33,851 | | | | 33,207 | | | | 32,099 | | | | 27,192 | |
| Total deposits | | $ | 2,373,789 | | | $ | 1,981,628 | | | $ | 1,927,686 | | | $ | 1,920,270 | | | $ | 1,871,157 | |
| | | | | | | | | | | | | | | | | | | | | |
| (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. |
Loan Delinquency Information
First Defiance Financial Corp.
| (dollars in thousands) | | Total Balance | | | Current | | | 30 to 89 days past due | | | Non Accrual Loans | |
| | | | | | | | | | | | | |
| March 31, 2017 | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 276,931 | | | $ | 273,133 | | | $ | 1,039 | | | $ | 2,759 | |
| Construction | | | 199,724 | | | | 199,724 | | | | - | | | | - | |
| Commercial real estate | | | 1,193,906 | | | | 1,182,836 | | | | 1,221 | | | | 9,849 | |
| Commercial | | | 504,366 | | | | 501,193 | | | | 1,684 | | | | 1,489 | |
| Consumer finance | | | 27,696 | | | | 27,360 | | | | 234 | | | | 102 | |
| Home equity and improvement | | | 132,965 | | | | 131,873 | | | | 217 | | | | 875 | |
| Total loans | | $ | 2,335,588 | | | $ | 2,316,119 | | | $ | 4,395 | | | $ | 15,074 | |
| | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | | | | | | | | | | | | | |
| March 31, 2016 | | | | | | | | | | | | | | | | |
| One to four family residential real estate | | $ | 208,818 | | | $ | 205,334 | | | $ | 354 | | | $ | 3,130 | |
| Construction | | | 145,635 | | | | 145,635 | | | | - | | | | - | |
| Commercial real estate | | | 989,468 | | | | 977,895 | | | | 1,229 | | | | 10,344 | |
| Commercial | | | 412,911 | | | | 409,232 | | | | 128 | | | | 3,551 | |
| Consumer finance | | | 15,679 | | | | 15,623 | | | | 47 | | | | 9 | |
| Home equity and improvement | | | 116,856 | | | | 115,324 | | | | 859 | | | | 673 | |
| Total loans | | $ | 1,889,367 | | | $ | 1,869,043 | | | $ | 2,617 | | | $ | 17,707 | |
| | | | | | | | | | | | | | | | | |
