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

Exhibit 99.1

 

For Immediate Release

FIRST DEFIANCE FINANCIAL CORP. ANNOUNCES

2018 FIRST QUARTER EARNINGS

· Earnings per share of $1.15 for the 2018 first quarter, up from $0.54 per share in the first quarter 2017

· Net income of $11.7 million for the 2018 first quarter, up from $5.1 million in the first quarter 2017

· Net interest margin of 3.95% for the 2018 first quarter, compared to 3.81% in the first quarter 2017

· Loan growth $9.6 million during the 2018 first quarter

· Deposit growth $54.1 million during the 2018 first quarter

· Non-performing loans of $27.9 million for the 2018 first quarter, compared to $15.1 million for the 2017 first quarter

DEFIANCE, OHIO (April 16, 2018)– First Defiance Financial Corp. (NASDAQ: FDEF) announced today that earnings for the first quarter of 2018 were $11.7 million, or $1.15 per diluted common share compared to $5.1 million or $0.54 per diluted common share for the first quarter of 2017. The first quarter 2017 results included approximately one month of operations from Commercial Savings Bank and had no impact from Corporate One Benefits Agency Inc. (“Corporate One”). In comparison, the first quarter 2018 results include a full quarter of operations from both Commercial Savings Bank and Corporate One. The acquisitions of Commercial Bancshares, Inc. and its banking subsidiary Commercial Savings Bank (collectively “CSB”) and Corporate One were completed on February 24, 2017, and April 1, 2017, respectively.

The results for the first quarter 2018 also include a credit loan loss provision of $1.1 million, which had an after tax benefit of $865,000, or $0.08 per diluted share, which more than offset expenses for OREO write-downs of $544,000, with an after tax impact of $430,000, or $0.04 per diluted share and non-executive employee bonuses of $300,000, which had an after tax impact of $237,000, or $0.02 per diluted share. The first quarter 2017 results included merger and conversion expenses related to the CSB transaction of $3.6 million, which had an after tax impact of $2.5 million, or $0.27 per diluted share. In addition, the first quarter 2017 results reflected the impact of the purchase of a bank owned life insurance policy which included 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, which together reduced net income approximately $200,000, or $0.02 per diluted share.

“We are very pleased to reach the $3.0 billion milestone in total assets at quarter-end,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “We have come a long way from a year ago by delivering on our acquisitions, executing our organic growth strategies, and improving our profitability metrics, which were further enhanced by the benefit from tax reform. We remain very positive that we can build upon this progress in 2018 and beyond.”

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Net interest income up compared to first quarter 2017

Net interest income of $25.7 million in the first quarter of 2018 was up from $21.6 million in the first quarter of 2017. The increase over the prior year’s first quarter was attributable to a full quarter of added operations from the CSB merger, organic growth and net interest margin expansion. Net interest margin was 3.95% for the first quarter of 2018, up from 3.88% in the fourth quarter of 2017, and up from 3.81% in the first quarter of 2017. Yield on interest earning assets increased to 4.43% in the first quarter of 2018, up 21 basis points from 4.22% in the first quarter of 2017. The cost of interest-bearing liabilities increased 11 basis points in the first quarter of 2018 to 0.65% from 0.54% in the first quarter of 2017.

“Our net interest margin improved in the first quarter and continues to perform well in the rising interest rate environment,” said Hileman. “While organic loan and deposit growth was seasonally down from last quarter, success in our growth strategies is evident with our 18.7% increase in net interest income from a year ago. We feel confident that this performance will continue as we are well positioned for future rate movements.”

Non-interest income up from first quarter 2017

First Defiance’s non-interest income in the first quarter of 2018 was $10.7 million compared with $10.5 million in the first quarter of 2017. The first quarter 2017 included a $1.5 million enhancement value gain related to the purchase of bank owned life insurance. Excluding the 2017 enhancement value gain, non-interest income increased $1.7 million primarily due to the inclusion of operations from the CSB and Corporate One mergers completed in 2017.

Mortgage banking income remained flat at $1.7 million in the first quarters of 2018 and 2017. Gains from the sale of mortgage loans also remained consistent at $1.1 million in the first quarters of 2018 and 2017. Mortgage loan servicing revenue was $944,000 in the first quarter of 2018, up slightly from $934,000 in the first quarter of 2017. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $37,000 in the first quarter of 2018 compared with a positive adjustment of $33,000 in the first quarter of 2017.

For the first quarter 2018, service fees and other charges were $3.1 million, up from $2.8 million in the first quarter of 2017; and commissions from the sale of insurance products were $4.3 million, up from $3.5 million in the first quarter of 2017. 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 2018, First Defiance’s insurance subsidiary, First Insurance Group, earned $1.0 million of contingent income, compared to $1.2 million during the first quarter of 2017. Trust income was $552,000 in the first quarter of 2018, up from $450,000 in the first quarter of 2017.

“Non-interest income continues to bolster our overall revenue growth with solid core growth in all of our major business lines with additional contributions from our acquisitions,” said Hileman.

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Non-interest expenses up from first quarter 2017

Total non-interest expense was $23.3 million in the first quarter of 2018, up from $23.1 million in the first quarter of 2017. The first quarter 2017 included expenses of $3.6 million related to the CSB merger and conversion. Excluding the 2017 merger and conversion expenses, the increase in non-interest expenses was $3.7 million, mostly due to the additional expenses from the operations of CSB and Corporate One mergers completed in 2017. Compensation and benefits decreased to $13.2 million in the first quarter of 2018, compared to $14.3 million in the first quarter of 2017. The decrease in compensation and benefits from a year ago is mainly due to the prior year period including $2.8 million of merger costs to settle employment and benefit agreements, while the current year period includes a full quarter of personnel expenses for the acquired CSB and Corporate One locations. Data processing cost was $2.1 million in the first quarter of 2018, up from $1.9 million in the first quarter of 2017. Other non-interest expense of $4.6 million in the first quarter of 2018 increased from $4.0 million in the first quarter of 2017. Other expenses in the first quarter 2018 include OREO write-downs of $544,000, while the first quarter 2017 included $667,000 of CSB merger and conversion related costs.

Credit quality

Non-performing loans totaled $27.9 million at March 31, 2018, a decrease from $30.7 million at December 31, 2017, but an increase from $15.1 million at March 31, 2017. The decrease from the prior quarter-end was due to the payoff of a large relationship previously downgraded in the second quarter of 2017. In addition, First Defiance had $1.4 million of OREO at March 31, 2018, compared to $705,000 at March 31, 2017. Accruing troubled debt restructured loans were $13.7 million at March 31, 2018, compared with $9.8 million at March 31, 2017.

The non-performing loan payoff resulted in a principal recovery of $1.7 million. As a result, the first quarter 2018 performance reflected net loan recoveries of $1.7 million and a credit provision for loan losses of $1.1 million compared with net loan charge-offs of $190,000 and a provision for loan loss expense of $55,000 for the same period in 2017.

The allowance for loan loss as a percentage of total loans was 1.16% at March 31, 2018, compared with 1.15% at March 31, 2017. In addition, the CSB loans acquired in 2017 were recorded at fair value with purchase accounting adjustment discounting the loan balance instead of an allowance for loan losses. For the CSB loans acquired the discount recorded totaled $3.7 million, or 1.9% of total CSB loans at March 31, 2018.

“Overall asset quality metrics improved from last quarter, with all non-performing asset categories declining and all allowance coverage ratios improving,” said Hileman. “Significant recoveries totaling $2.0 million contributed to both higher earnings and strengthened reserves this quarter.”

Total assets at $3.02 billion

Total assets at March 31, 2018, were $3.02 billion compared to $2.99 billion at December 31, 2017, and $2.93 billion at March 31, 2017.

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Net loans receivable (excluding loans held for sale) were $2.33 billion at March 31, 2018, compared to $2.32 billion at December 31, 2017, and $2.21 billion at March 31, 2017. At March 31, 2018, net loans receivable grew $118.8 million, or 5.4% from a year ago.

Also, at March 31, 2018, goodwill and other intangible assets totaled $103.9 million compared to $104.3 million at December 31, 2017, and $97.1 million at March 31, 2017.

Total deposits at March 31, 2018, were $2.49 billion compared with $2.44 billion at December 31, 2017, and $2.37 billion at March 31, 2017. At March 31, 2018, total deposits grew $118.0 million, or 5.0% from a year ago.

Total stockholders’ equity was $379.2 million at March 31, 2018, compared to $373.3 million at December 31, 2017, and $354.2 million at March 31, 2017.

Dividend to be paid May 25

The Board of Directors declared a quarterly cash dividend of $0.30 per common share payable May 25, 2018, to shareholders of record at the close of business on May 18, 2018. The dividend represents an annual dividend of 2.09 percent based on the First Defiance common stock closing price on April 13, 2018. First Defiance has approximately 10,182,649 common shares outstanding.

Chairman William J. Small Announces Planned Retirement

First Defiance Financial Corp. Chairman William J. Small announced that he will be retiring from the Board of Directors effective July 31, 2018.  Mr. Small has served as Chairman since 1999 and served as President and CEO of First Defiance and CEO of First Federal Bank from 1999 through 2013.  John L. Bookmyer will succeed Mr. Small as Chairman.  Mr. Bookmyer has been a member of the First Defiance Board since 2005 and currently serves as the Lead Independent Director.

Conference call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, April 17, 2018, 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 athttps://services.choruscall.com/links/fdef180417.html.

The replay of the conference call Webcast will be available atwww.fdef.com until April 17, 2019, at 9:00 a.m. ET.

First Defiance Financial Corp.

First Defiance Financial Corp. (NASDAQ:FDEF), 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 and a loan production office in Ann Arbor, Michigan. First Insurance Group, including its division Corporate One Benefits, is a full-service insurance agency with nine offices throughout northwest Ohio.

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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, 2017. 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, 2018 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.

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Consolidated Balance Sheets (Unaudited)

First Defiance Financial Corp.  

	March 31,			December 31,
(in thousands)	2018			2017
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions	$	46,566		$	58,693
Interest-bearing deposits		92,000			55,000
		138,566			113,693
Securities
Available-for sale, carried at fair value		270,111			260,650
Held-to-maturity, carried at amortized cost		642			648
		270,753			261,298
Loans		2,358,330			2,348,713
Allowance for loan losses		(27,267	)		(26,683	)
Loans, net		2,331,063			2,322,030
Loans held for sale		11,266			10,435
Mortgage servicing rights		9,850			9,808
Accrued interest receivable		9,359			8,706
Federal Home Loan Bank stock		15,989			15,992
Bank Owned Life Insurance		66,630			66,230
Office properties and equipment		39,826			40,217
Real estate and other assets held for sale		1,440			1,532
Goodwill		98,569			98,569
Core deposit and other intangibles		5,356			5,703
Deferred taxes		978			231
Other assets		23,359			38,959
Total Assets	$	3,023,004		$	2,993,403
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits	$	550,742		$	571,360
Interest-bearing deposits		1,941,059			1,866,296
Total deposits		2,491,801			2,437,656
Advances from Federal Home Loan Bank		71,001			84,279
Notes payable and other interest-bearing liabilities		9,321			26,019
Subordinated debentures		36,083			36,083
Advance payments by borrowers for tax and insurance		2,482			2,925
Other liabilities		33,102			33,155
Total Liabilities		2,643,790			2,620,117
Stockholders’ Equity
Preferred stock		-			-
Common stock, net		127			127
Additional paid-in-capital		160,547			160,940
Accumulated other comprehensive income (loss)		(2,546	)		217
Retained earnings		271,426			262,900
Treasury stock, at cost		(50,340	)		(50,898	)
Total stockholders’ equity		379,214			373,286
Total Liabilities and Stockholders’ Equity	$	3,023,004		$	2,993,403

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Consolidated Statements of Income (Unaudited)

First Defiance Financial Corp.

	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2018			2017
Interest Income:
Loans	$	26,526		$	21,969
Investment securities		1,851			1,756
Interest-bearing deposits		297			145
FHLB stock dividends		231			166
Total interest income		28,905			24,036
Interest Expense:
Deposits		2,611			1,796
FHLB advances and other		319			366
Subordinated debentures		280			215
Notes Payable		8			14
Total interest expense		3,218			2,391
Net interest income		25,687			21,645
Provision for loan losses		(1,095	)		55
Net interest income after provision for loan losses		26,782			21,590
Non-interest Income:
Service fees and other charges		3,131			2,760
Mortgage banking income		1,742			1,738
Gain on sale of non-mortgage loans		224			-
Insurance commissions		4,277			3,457
Trust income		552			450
Income from Bank Owned Life Insurance		400			1,823
Other non-interest income		377			321
Total Non-interest Income		10,703			10,549
Non-interest Expense:
Compensation and benefits		13,249			14,335
Occupancy		2,071			1,837
FDIC insurance premium		360			290
Financial institutions tax		531			480
Data processing		2,105			1,939
Amortization of intangibles		347			232
Other non-interest expense		4,588			4,029
Total Non-interest Expense		23,251			23,142
Income before income taxes		14,234			8,997
Income taxes		2,497			3,857
Net Income	$	11,737		$	5,140
Earnings per common share:
Basic	$	1.15		$	0.54
Diluted	$	1.15		$	0.54
Average Shares Outstanding:
Basic		10,165			9,435
Diluted		10,219			9,490

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Financial Summary and Comparison (Unaudited)

First Defiance Financial Corp.

	Three Months Ended
	March 31,
(dollars in thousands, except per share data)	2018			2017			% change
Summary of Operations
Tax-equivalent interest income (2)	$	29,142		$	24,505			18.9	%
Interest expense		3,218			2,391			34.6
Tax-equivalent net interest income (2)		25,924			22,114			17.2
Provision for loan losses		(1,095	)		55			NM
Tax-equivalent NII after provision for loan loss (2)		27,019			22,059			22.5
Investment Securities gains		-			-			-
Non-interest income (excluding securities gains/losses)		10,703			10,549			1.5
Non-interest expense		23,251			23,142			0.5
Income taxes		2,497			3,857			(35.3	)
Net Income		11,737			5,140			128.3
Tax equivalent adjustment (2)		237			469			(49.5	)
At Period End
Assets		3,023,004			2,929,474			3.2
Earning assets		2,748,338			2,640,183			4.1
Loans		2,358,330			2,238,864			5.3
Allowance for loan losses		27,267			25,749			5.9
Deposits		2,491,801			2,373,789			5.0
Stockholders’ equity		379,214			354,191			7.1
Average Balances
Assets		2,977,864			2,622,402			13.6
Earning assets		2,664,114			2,355,544			13.1
Loans		2,316,316			2,026,067			14.3
Deposits and interest-bearing liabilities		2,565,537			2,275,724			12.7
Deposits		2,434,440			2,109,637			15.4
Stockholders’ equity		373,993			314,442			18.9
Stockholders’ equity / assets		12.56	%		11.99	%		4.7
Per Common Share Data
Net Income
Basic	$	1.15		$	0.54			113.0
Diluted		1.15			0.54			113.0
Dividends		0.30			0.25			20.0
Market Value:
High	$	59.85		$	51.15			17.0
Low		51.02			46.27			10.3
Close		57.32			49.51			15.8
Common Book Value		37.24			34.92			6.7
Tangible Common Book Value (1)		27.04			25.35			6.7
Shares outstanding, end of period (000)		10,182			10,143			0.4
Performance Ratios (annualized)
Tax-equivalent net interest margin (2)		3.95	%		3.81	%		3.5
Return on average assets		1.60	%		0.79	%		101.1
Return on average equity		12.73	%		6.63	%		92.0
Efficiency ratio (3)		63.48	%		70.85	%		(10.4	)
Effective tax rate		17.54	%		42.87	%		(59.1	)
Dividend payout ratio (basic)		26.09	%		46.30	%		(43.7	)

(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
	March 31,
(dollars in thousands)	2018			2017
Gain from sale of mortgage loans	$	1,080		$	1,083
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		944			934
Amortization of mortgage servicing rights		(319	)		(312	)
Mortgage servicing rights valuation adjustments		37			33
		662			655
Total revenue from sale and servicing of mortgage loans	$	1,742		$	1,738

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Yield Analysis

First Defiance Financial Corp.

	Three Months Ended March 31,
	(dollars in thousands)
	2018							2017
	Average				Yield			Average				Yield
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	2,316,316	$	26,550		4.65	%	$	2,026,067	$	22,020		4.41	%
Securities		263,596		2,064		3.16	%(3)		254,842		2,174		3.48	%
Interest Bearing Deposits		68,211		297		1.77	%		60,083		145		0.98	%
FHLB stock		15,991		231		5.86	%		14,552		166		4.63	%
Total interest-earning assets		2,664,114		29,142		4.43	%		2,355,544		24,505		4.22	%
Non-interest-earning assets		313,750							266,858
Total assets	$	2,977,864						$	2,622,402
Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	1,888,990	$	2,611		0.56	%	$	1,626,742	$	1,796		0.45	%
FHLB advances and other		78,923		319		1.64	%		104,277		366		1.42	%
Subordinated debentures		36,192		280		3.14	%		36,150		215		2.41	%
Notes payable		15,982		8		0.20	%		25,660		14		0.22	%
Total interest-bearing liabilities		2,020,087		3,218		0.65	%		1,792,829		2,391		0.54	%
Non-interest bearing deposits		545,450		-		-			482,895		-		-
Total including non-interest-bearing demand deposits		2,565,537		3,218		0.51	%		2,275,724		2,391		0.43	%
Other non-interest-bearing liabilities		38,334							32,236
Total liabilities		2,603,871							2,307,960
Stockholders' equity		373,993							314,442
Total liabilities and stockholders' equity	$	2,977,864						$	2,622,402
Net interest income; interest rate spread			$	25,924		3.78	%			$	22,114		3.68	%
Net interest margin (4)						3.95	%						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 tax equivalent 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)	1st Qtr 2018			4th Qtr 2017			3rd Qtr 2017			2nd Qtr 2017			1st Qtr 2017
Summary of Operations
Tax-equivalent interest income (1)	$	29,142		$	29,009		$	28,557		$	27,944		$	24,505
Interest expense		3,218			3,140			3,074			2,826			2,391
Tax-equivalent net interest income (1)		25,924			25,869			25,483			25,118			22,114
Provision for loan losses		(1,095	)		314			462			2,118			55
Tax-equivalent NII after provision for loan losses (1)		27,019			25,555			25,021			23,000			22,059
Investment securities gains, net of impairment		-			160			158			267			-
Non-interest income (excluding securities gains/losses)		10,703			9,737			9,337			9,873			10,549
Non-interest expense		23,251			21,141			20,440			20,630			23,142
Income taxes		2,497			4,430			4,219			3,677			3,857
Net income		11,737			9,399			9,381			8,347			5,140
Tax equivalent adjustment (1)		237			482			476			486			469
At Period End
Total assets	$	3,023,004		$	2,993,403		$	2,935,030		$	2,890,507		$	2,928,697
Earning assets		2,748,338			2,691,438			2,633,996			2,596,674			2,639,325
Loans		2,358,330			2,348,713			2,276,042			2,254,435			2,238,006
Allowance for loan losses		27,267			26,683			26,341			25,915			25,749
Deposits		2,491,801			2,437,656			2,360,675			2,326,702			2,373,789
Stockholders’ equity		379,214			373,286			367,924			361,430			354,191
Stockholders’ equity / assets		12.54	%		12.47	%		12.54	%		12.50	%		12.09	%
Goodwill		98,569			98,569			98,370			98,318			90,768
Average Balances
Total assets	$	2,977,864		$	2,968,445		$	2,906,795		$	2,908,483		$	2,622,402
Earning assets		2,664,114			2,646,643			2,590,463			2,591,397			2,355,544
Loans		2,316,316			2,279,358			2,251,071			2,238,061			2,026,067
Deposits and interest-bearing liabilities		2,565,537			2,560,258			2,507,805			2,516,024			2,275,724
Deposits		2,434,440			2,400,061			2,338,817			2,346,336			2,109,637
Stockholders’ equity		373,993			369,366			363,612			357,523			314,442
Stockholders’ equity / assets		12.56	%		12.44	%		12.51	%		12.29	%		11.99	%
Per Common Share Data
Net Income:
Basic	$	1.15		$	0.93		$	0.92		$	0.82		$	0.54
Diluted		1.15			0.92			0.92			0.82			0.54
Dividends		0.30			0.25			0.25			0.25			0.25
Market Value:
High	$	59.85		$	56.91		$	53.99		$	56.90		$	51.15
Low		51.02			50.28			47.01			48.78			46.27
Close		57.32			51.97			52.49			52.68			49.51
Common Book Value		37.24			36.76			36.25			35.61			34.92
Shares outstanding, end of period (in thousands)		10,182			10,156			10,149			10,147			10,143
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.95	%		3.88	%		3.91	%		3.89	%		3.81	%
Return on average assets		1.60	%		1.26	%		1.28	%		1.15	%		0.79	%
Return on average equity		12.73	%		10.10	%		10.24	%		9.36	%		6.63	%
Efficiency ratio (2)		63.48	%		59.37	%		58.70	%		58.96	%		70.85	%
Effective tax rate		17.54	%		32.03	%		31.02	%		30.58	%		42.87	%
Common dividend payout ratio (basic)		26.09	%		26.88	%		27.17	%		30.49	%		46.30	%

(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)	1st Qtr 2018			4th Qtr 2017			3rd Qtr 2017			2nd Qtr 2017			1st Qtr 2017
Loan Portfolio Composition
One to four family residential real estate	$	275,547		$	274,862		$	271,048		$	276,578		$	276,931
Construction		251,944			265,476			244,920			234,688			199,724
Commercial real estate		1,282,027			1,235,221			1,205,695			1,182,087			1,193,906
Commercial		500,496			526,142			510,240			515,004			504,366
Consumer finance		28,035			29,109			29,009			28,860			27,696
Home equity and improvement		133,407			135,457			132,220			130,429			132,965
Total loans		2,471,456			2,466,267			2,393,132			2,367,646			2,335,588
Less:
Undisbursed loan funds		111,450			115,972			115,714			112,000			95,460
Deferred loan origination fees		1,676			1,582			1,379			1,211			1,264
Allowance for loan loss		27,267			26,683			26,341			25,915			25,749
Net Loans	$	2,331,063		$	2,322,030		$	2,249,698		$	2,228,520		$	2,213,115
Allowance for loan loss activity
Beginning allowance	$	26,683		$	26,341		$	25,915		$	25,749		$	25,884
Provision for loan losses		(1,095	)		314			462			2,118			55
Credit loss charge-offs:
One to four family residential real estate		16			170			60			0			49
Commercial real estate		55			29			0			110			290
Commercial		97			210			64			2,027			0
Consumer finance		31			27			20			21			71
Home equity and improvement		117			55			92			100			54
Total charge-offs		316			491			236			2,258			464
Total recoveries		1,995			519			200			306			274
Net charge-offs (recoveries)		(1,679	)		(28	)		36			1,952			190
Ending allowance	$	27,267		$	26,683		$	26,341		$	25,915		$	25,749
Credit Quality
Total non-performing loans (1)	$	27,925		$	30,715		$	29,152		$	30,359		$	15,057
Real estate owned (REO)		1,440			1,532			532			672			705
Total non-performing assets (2)	$	29,365		$	32,247		$	29,684		$	31,031		$	15,762
Net charge-offs (recoveries)		(1,679	)		(28	)		36			1,952			190
Restructured loans, accruing (3)		13,722			13,770			13,044			10,521			9,814
Allowance for loan losses / loans		1.16	%		1.14	%		1.16	%		1.15	%		1.15	%
Allowance for loan losses / non-performing assets		92.86	%		82.75	%		88.74	%		83.51	%		163.36	%
Allowance for loan losses / non-performing loans		97.64	%		86.87	%		90.36	%		85.36	%		171.01	%
Non-performing assets / loans plus REO		1.24	%		1.37	%		1.30	%		1.38	%		0.70	%
Non-performing assets / total assets		0.97	%		1.08	%		1.01	%		1.07	%		0.54	%
Net charge-offs / average loans (annualized)		-0.29	%		0.00	%		0.01	%		0.35	%		0.04	%
Deposit Balances
Non-interest-bearing demand deposits	$	550,742		$	571,360		$	519,911		$	520,778		$	579,943
Interest-bearing demand deposits and money market		1,055,416			1,005,519			989,514			967,834			973,459
Savings deposits		306,510			302,022			296,230			288,643			288,498
Retail time deposits less than $250,000		512,746			504,912			504,277			499,298			490,953
Retail time deposits greater than $250,000		66,387			53,843			50,743			50,149			40,936
Total deposits	$	2,491,801		$	2,437,656		$	2,360,675		$	2,326,702		$	2,373,789

(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
March 31, 2018
One to four family residential real estate	$	275,547	$	272,323	$	764	$	2,460
Construction		251,944		251,944		-		-
Commercial real estate		1,282,027		1,264,623		53		17,351
Commercial		500,496		493,325		5		7,166
Consumer finance		28,035		27,703		293		39
Home equity and improvement		133,407		132,477		21		909
Total loans	$	2,471,456	$	2,442,395	$	1,136	$	27,925
December 31, 2017
One to four family residential real estate	$	274,862	$	269,624	$	2,201	$	3,037
Construction		265,476		265,476		-		-
Commercial real estate		1,235,221		1,215,980		1,022		18,219
Commercial		526,142		515,874		1,427		8,841
Consumer finance		29,109		28,728		353		28
Home equity and improvement		135,457		131,986		2,881		590
Total loans	$	2,466,267	$	2,427,668	$	7,884	$	30,715
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

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