Exhibit 99
NEWS RELEASE
| | | | | | |
 | | | | Contact: | | William J. Small Chairman, President and CEO (419) 782-5104 bsmall@first-fed.com |
| | | |
| | | |
| | | |
| | | |
For Immediate Release
FIRST DEFIANCE FINANCIAL CORP. ANNOUNCES 2010
SECOND QUARTER EARNINGS
| | • | | Net Income of $2.1 million for 2010 second quarter |
| | • | | Provision for Loan Losses of $5.4 million reflects continued challenging credit environment |
| | • | | Charge of $571,000 on previously recorded MSR assets |
| | • | | Other-Than-Temporary Impairment of $71,000 recognized on certain investment securities |
| | • | | Net Interest Income increased by $1.4 million or 8.5% over 2009 second quarter |
| | • | | Net Interest Margin of 3.89% up from 2009 second quarter |
DEFIANCE, OHIO (July 19, 2010) – First Defiance Financial Corp. (NASDAQ: FDEF) today announced that net income for its quarter ended June 30, 2010 totaled $2.1 million, or $0.19 per diluted common share, compared to $2.9 million or $0.29 per diluted common share for the quarter ended June 30, 2009. The 2010 results included $37,000 of acquisition-related charges associated with the company’s May, 2010 purchase of the group benefits business line from Andres O’Neil & Lowe Insurance Agency.
For the six month period ended June 30, 2010, First Defiance earned $3.6 million or $0.31 per diluted common share compared to $6.3 million or $0.65 per diluted common share for the six month period ended June 30, 2009. Excluding the after-tax cost of the $24,000 acquisition-related charges in 2010, First Defiance earned $3.6 million, or $0.32 per diluted common share for the first half of 2010.
“We are encouraged by our overall second quarter results,” said William J. Small, Chairman, President and Chief Executive Officer of First Defiance Financial Corp. “Credit quality once again had a major impact on our second quarter earnings with a higher provision for loan losses, but we are seeing some positive movement toward improving credit quality over the last several quarters. We are also pleased with the improvement in the net interest margin this quarter despite the low interest rate environment. We do foresee a continuation of a difficult economic environment throughout 2010.”
1
Credit Quality
The second quarter 2010 results include expense for provision for loan losses of $5.4 million, compared with $4.0 million in the same period in 2009 and $6.9 million in the first quarter of 2010.
Non-performing loans totaled $40.7 million at June 30, 2010, a slight increase from $40.4 million at June 30, 2009. The June 30, 2010 balance included $31.8 million of loans that are 90 days past due and or are on non-accrual status and another $8.9 million of loans considered non-performing because of changes in terms granted to borrowers, although the loans are still accruing interest. In addition, First Defiance had $12.7 million of Real Estate Owned at June 30, 2010, up from $8.6 million at June 30, 2009. For the second quarter of 2010, First Defiance recorded net charge-offs of $5.6 million, which represented 1.44% of average loans outstanding (annualized) for the quarter.
“First Federal Bank has a history of excellent asset quality and we are working diligently to get back to levels in line with our long term goals. The higher level of charge-offs this quarter was not unexpected, and was accounted for in our provision for loan losses in the quarter as more loans move through the credit cycle. We continue to closely monitor the portfolio and the economic environment in our markets and are encouraged by our recent credit metric trends,” Small said.
Net Interest Margin
Net interest income increased to $17.6 million for the second quarter of 2010, a $1.4 million or 8.5% increase over the second quarter of 2009. Net interest margin was 3.89% for the 2010 second quarter compared to 3.61% in the second quarter of 2009 and 3.85% in the first quarter of 2010. Yield on interest earning assets declined by 14 basis points, to 5.36% from 5.50% in the 2009 second quarter while the cost of interest-bearing liabilities and non-interest-bearing demand deposits decreased by 44 basis points to 1.51% from 1.95%.
“We are pleased with the improvement in the net interest margin although the challenges to net interest margin are far from over,” said Small. “It’s a low rate environment, which requires that we focus on a disciplined pricing strategy to strengthen net interest margin for the remainder of the year.”
Investment Portfolio
The Other-Than-Temporary Impairment (OTTI) charge recognized by First Defiance in the second quarter of 2010 totaled $71,000 compared with $875,000 in the second quarter of 2009. The 2010 second quarter OTTI charge related to two Trust Preferred Collateralized Debt Obligations (CDOs) with a remaining book value of $1.6 million.
First Defiance also has other Trust Preferred CDO investments with a total book value of $2.2 million and fair value of $1.1 million at June 30, 2010. Two of these investments with a book value of $2.0 million and a fair value of $1.0 million continue to pay principal and interest in accordance with the contractual terms of the securities. The decline in value of those investments is primarily due to the overall lack of liquidity in the CDO market. Management has not deemed the impairment in value of these CDO investments to be Other-Than-Temporary,
2
and, therefore, has not recognized the reduction in value of those investments in earnings. The remaining investment with a book value of $197,000 and a fair value of $91,000 has been written down with OTTI charges in prior periods, but the second quarter of 2010 analysis did not result in additional OTTI for this investment.
Non-Interest Income
Non-interest income for the 2010 second quarter decreased to $5.8 million from $8.4 million in the second quarter of 2009. Most of the decrease was in mortgage banking income, which declined to $1.0 million in the 2010 second quarter from $4.0 million for the same period in 2009. Gains from the sale of mortgage loans declined $1.7 million in the second quarter of 2010 to $1.2 million from $2.9 million in the second quarter of 2009. Mortgage loan servicing revenue increased to $754,000 in the second quarter of 2010 from $695,000 in the 2009 second quarter. The charges for the amortization of servicing rights decreased to $410,000 in the second quarter of 2010 from $1.2 million in the second quarter of 2009.
First Defiance recorded a negative valuation allowance adjustment of $571,000 on mortgage servicing rights (MSR) valuation adjustment in the second quarter of 2010 compared with a positive adjustment of $1.5 million in the second quarter of 2009. The MSR valuation adjustment is a reflection of the change in the fair value of certain sectors of the Company’s portfolio of mortgage servicing rights.
Loss on investment securities for the second quarter of 2010 was $71,000, all of which related to OTTI charges. In the second quarter of 2009, loss on investment securities was $750,000 which included OTTI charges of $875,000 and gain on the sale of securities of $125,000.
“Mortgage banking activity in the second quarter declined dramatically from the record highs set in 2009,” commented Small. “In 2009, we broke records that were in place from the refinancing boom of 2002 through 2004. In the second quarter of 2010 we generated $67.0 million in loans compared with $198.2 million in loans in the second quarter of 2009. Due to the lower rate environment, we recorded impairment on our previously recorded servicing rights.”
Non-Interest Expenses
Total non-interest expense decreased to $15.0 million, including $37,000 of acquisition charges, for the quarter ended June 30, 2010, a decrease from the $16.1 million of non-interest expense recognized in the 2009 second quarter. FDIC insurance expense decreased to $929,000 in the second quarter of 2010 from $1.5 million in the same period of 2009. The second quarter of 2009 included a special assessment of $904,000.
Compensation and benefits decreased to $6.6 million from $7.6 million in the second quarter of 2009. Other non-interest expense increased to $3.8 million in the second quarter of 2010 from $3.0 million in the second quarter of 2009. The period over period compensation and benefit expense reduction was offset partially by credit, collection and OREO-related costs, which increased $265,000 over the second quarter of 2009, and $346,000 of charges incurred this quarter related to the core system conversion scheduled for the fourth quarter of 2010.
3
Year-To-Date Results
For the six month period ended June 30, 2010, net interest income totaled $34.6 million, compared with $32.2 million in the first six months of 2009. Average interest-earning assets increased to $1.84 billion for the first half of 2010 compared to $1.80 billion for the first half of 2009. Net interest margin for the first six months of 2010 was 3.87%, up 21 basis points from the 3.66% margin reported in the six month period ended June 30, 2009.
The provision for loan losses for the first half of 2010 was $12.3 million, compared to $6.7 million recorded during the first six months of 2009.
Non-interest income for the first half of 2010 was $12.6 million compared to $15.2 million during the same period of 2009. Most of the non-interest income decrease was in mortgage banking, which decreased 58% to $2.8 million for the first six months of 2010 compared to $6.7 million in the first six months of 2009. Service fees and other charges were $6.6 million for the first half of 2010, compared to $6.4 million during the first half of 2009. The 2010 first half non-interest income was reduced by $141,000 of OTTI charges recognized for impaired investment securities compared with $1.5 million in the first half of 2009.
Non-interest expense decreased to $29.9 million for the first six months of 2010 from $31.1 million in 2009. Occupancy costs were $3.5 million in the first half of 2010 compared with $4.0 million in the first half of 2009. Credit, collection and OREO-related costs have increased $699,000 in the first six months of 2010 over the first six months of 2009. Year to date 2010 non-interest expense included the $37,000 of charges associated with the acquisition of a group medical benefits book of business and $417,000 related to the core system conversion that will take place later this year.
“These continue to be very challenging times in banking,” said Small. “We are confident in our ability to meet the challenges, and we are keeping a watchful eye on the federal government initiatives that are coming down the road. Regulation changes, stimulus package ramifications and special assessments by the FDIC will certainly have an impact on our operations in the future.”
Total Assets at $2.04 Billion
Total assets at June 30, 2010 were $2.04 billion, compared to $2.02 billion at June 30, 2009. Net loans receivable (excluding loans held for sale) were $1.53 billion at June 30, 2010 compared to $1.58 billion at June 30, 2009. Total cash and cash equivalents were $122.1 million at June 30, 2010 compared with $88.8 million at June 30, 2009, an increase of $33.3 million. Total deposits at June 30, 2010 were $1.58 billion compared to $1.55 billion at June 30, 2009, an increase of $27.4 million. Non-interest bearing deposits at June 30, 2010 were $190.1 million compared to $180.0 million at June 30, 2009. Total stockholders’ equity was $238.4 million at June 30, 2010 compared to $232.7 million at June 30, 2009. Also at June 30, 2010, goodwill and other intangible assets totaled $64.4 million compared to $64.2 million at June 30, 2009.
4
Conference Call
First Defiance Financial Corp. will host a conference call at 11 a.m. EDT on Tuesday, July 20, 2010, to discuss the company’s strategy and the second quarter results. The conference call may be accessed by calling 1-800-860-2442.
Internet access to the call is also available (in listen-only mode) at the following URL: http://www.talkpoint.com/viewer/starthere.asp?Pres=130999
The audio replay of the conference call Webcast will be available atwww.fdef.com until Tuesday, August 3, 2010 at 9:00 a.m.
First Defiance Financial Corp.
First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance & Investments. First Federal operates 33 full service branches and 45 ATM locations in northwest Ohio, southeast Michigan and Fort Wayne, Indiana. First Insurance & Investments specializes in property and casualty and group health and life insurance, with offices in Defiance, Bryan, Archbold and Bowling Green, Ohio.
For more information, visit the company’s Web site 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 OREO properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission (SEC) filings, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. One or more of these factors have affected or could in the future affect the Company’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.
5
Consolidated Balance Sheets
First Defiance Financial Corp.
| | | | | | | | | | | | |
(in thousands) | | (Unaudited)
June 30,
2010 | | | December 31,
2009 | | | June 30,
2009 | |
| | | |
Assets | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | | | | | | | |
Cash and amounts due from depository institutions | | $ | 33,528 | | | $ | 29,613 | | | $ | 31,606 | |
Interest-bearing deposits | | | 88,544 | | | | 91,503 | | | | 57,178 | |
| | | | | | | | | | | | |
| | | 122,072 | | | | 121,116 | | | | 88,784 | |
| | | |
Securities | | | | | | | | | | | | |
Available-for sale, carried at fair value | | | 159,131 | | | | 137,458 | | | | 133,009 | |
Held-to-maturity, carried at amortized cost | | | 1,836 | | | | 1,920 | | | | 831 | |
| | | | | | | | | | | | |
| | | 160,967 | | | | 139,378 | | | | 133,840 | |
| | | |
Loans | | | 1,571,413 | | | | 1,617,122 | | | | 1,610,460 | |
Allowance for loan losses | | | (38,852 | ) | | | (36,547 | ) | | | (25,840 | ) |
| | | | | | | | | | | | |
Loans, net | | | 1,532,561 | | | | 1,580,575 | | | | 1,584,620 | |
Loans held for sale | | | 16,000 | | | | 10,346 | | | | 23,835 | |
Mortgage servicing rights | | | 8,720 | | | | 8,958 | | | | 8,919 | |
Accrued interest receivable | | | 6,973 | | | | 6,851 | | | | 7,023 | |
Federal Home Loan Bank stock | | | 21,376 | | | | 21,376 | | | | 21,376 | |
Bank Owned Life Insurance | | | 30,767 | | | | 30,804 | | | | 28,884 | |
Office properties and equipment | | | 42,378 | | | | 43,597 | | | | 46,835 | |
Real estate and other assets held for sale | | | 12,735 | | | | 13,527 | | | | 8,567 | |
Goodwill | | | 57,556 | | | | 56,585 | | | | 56,585 | |
Core deposit and other intangibles | | | 6,841 | | | | 6,888 | | | | 7,598 | |
Deferred taxes | | | 3,495 | | | | 3,289 | | | | 52 | |
Other assets | | | 16,215 | | | | 14,233 | | | | 6,645 | |
| | | | | | | | | | | | |
Total Assets | | $ | 2,038,656 | | | $ | 2,057,523 | | | $ | 2,023,563 | |
| | | | | | | | | | | | |
| | | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | | |
Non-interest-bearing deposits | | $ | 190,140 | | | $ | 189,132 | | | $ | 180,035 | |
Interest-bearing deposits | | | 1,390,380 | | | | 1,391,094 | | | | 1,373,109 | |
| | | | | | | | | | | | |
Total deposits | | | 1,580,520 | | | | 1,580,226 | | | | 1,553,144 | |
Advances from Federal Home Loan Bank | | | 126,906 | | | | 146,927 | | | | 146,947 | |
Notes payable and other interest-bearing liabilities | | | 44,702 | | | | 48,398 | | | | 40,284 | |
Subordinated debentures | | | 36,083 | | | | 36,083 | | | | 36,083 | |
Advance payments by borrowers for tax and insurance | | | 379 | | | | 665 | | | | 389 | |
Other liabilities | | | 11,628 | | | | 11,138 | | | | 14,033 | |
| | | | | | | | | | | | |
Total liabilities | | | 1,800,218 | | | | 1,823,437 | | | | 1,790,880 | |
Stockholders’ Equity | | | | | | | | | | | | |
Preferred stock- including warrants and amortization of discount on preferred shares | | | 37,000 | | | | 37,000 | | | | 37,000 | |
Preferred stock discount | | | (625 | ) | | | (707 | ) | | | (789 | ) |
Common stock, net | | | 127 | | | | 127 | | | | 127 | |
Common stock warrant | | | 878 | | | | 878 | | | | 878 | |
Additional paid-in-capital | | | 140,767 | | | | 140,677 | | | | 140,567 | |
Accumulated other comprehensive loss | | | 1,460 | | | | (158 | ) | | | (1,813 | ) |
Retained earnings | | | 131,459 | | | | 128,900 | | | | 129,344 | |
Treasury stock, at cost | | | (72,628 | ) | | | (72,631 | ) | | | (72,631 | ) |
| | | | | | | | | | | | |
Total stockholders’ equity | | | 238,438 | | | | 234,086 | | | | 232,683 | |
| | | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 2,038,656 | | | $ | 2,057,523 | | | $ | 2,023,563 | |
| | | | | | | | | | | | |
| | | |
| | | — | | | | — | | | | — | |
6
Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
(in thousands, except per share amounts) | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Interest Income: | | | | | | | | | | | | | | | | |
Loans | | $ | 22,477 | | | $ | 23,086 | | | $ | 44,874 | | | $ | 46,463 | |
Investment securities | | | 1,569 | | | | 1,474 | | | | 3,021 | | | | 2,966 | |
Interest-bearing deposits | | | 69 | | | | 33 | | | | 130 | | | | 47 | |
FHLB stock dividends | | | 234 | | | | 229 | | | | 453 | | | | 468 | |
| | | | | | | | | | | | | | | | |
Total interest income | | | 24,349 | | | | 24,822 | | | | 48,478 | | | | 49,944 | |
Interest Expense: | | | | | | | | | | | | | | | | |
Deposits | | | 5,126 | | | | 6,859 | | | | 10,524 | | | | 14,042 | |
FHLB advances and other | | | 1,220 | | | | 1,279 | | | | 2,438 | | | | 2,598 | |
Subordinated debentures | | | 327 | | | | 369 | | | | 650 | | | | 795 | |
Notes Payable | | | 115 | | | | 136 | | | | 220 | | | | 293 | |
| | | | | | | | | | | | | | | | |
Total interest expense | | | 6,788 | | | | 8,643 | | | | 13,832 | | | | 17,728 | |
| | | | | | | | | | | | | | | | |
Net interest income | | | 17,561 | | | | 16,179 | | | | 34,646 | | | | 32,216 | |
Provision for loan losses | | | 5,440 | | | | 3,965 | | | | 12,329 | | | | 6,711 | |
| | | | | | | | | | | | | | | | |
Net interest income after provision for loan losses | | | 12,121 | | | | 12,214 | | | | 22,317 | | | | 25,505 | |
Non-interest Income: | | | | | | | | | | | | | | | | |
Service fees and other charges | | | 3,397 | | | | 3,326 | | | | 6,555 | | | | 6,412 | |
Mortgage banking income | | | 985 | | | | 3,983 | | | | 2,792 | | | | 6,697 | |
Gain on sale of non-mortgage loans | | | 50 | | | | 45 | | | | 87 | | | | 100 | |
Gain on securities | | | — | | | | 125 | | | | 6 | | | | 125 | |
Impairment on securities | | | (71 | ) | | | (875 | ) | | | (141 | ) | | | (1,547 | ) |
Insurance and investment sales commissions | | | 1,309 | | | | 1,293 | | | | 2,417 | | | | 2,816 | |
Trust income | | | 132 | | | | 103 | | | | 254 | | | | 205 | |
Income from Bank Owned Life Insurance | | | 212 | | | | 78 | | | | 691 | | | | 137 | |
Other non-interest income | | | (223 | ) | | | 281 | | | | (103 | ) | | | 218 | |
| | | | | | | | | | | | | | | | |
Total Non-interest Income | | | 5,791 | | | | 8,359 | | | | 12,558 | | | | 15,163 | |
Non-interest Expense: | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 6,589 | | | | 7,585 | | | | 13,047 | | | | 14,950 | |
Occupancy | | | 1,701 | | | | 1,924 | | | | 3,529 | | | | 4,041 | |
FDIC insurance premium | | | 929 | | | | 1,497 | | | | 1,975 | | | | 2,064 | |
State franchise tax | | | 516 | | | | 596 | | | | 1,079 | | | | 1,097 | |
Data processing | | | 1,174 | | | | 1,176 | | | | 2,370 | | | | 2,230 | |
Amortization of intangibles | | | 345 | | | | 355 | | | | 782 | | | | 746 | |
One time acquisition related charges | | | 37 | | | | — | | | | 37 | | | | — | |
Other non-interest expense | | | 3,754 | | | | 3,000 | | | | 7,058 | | | | 6,001 | |
| | | | | | | | | | | | | | | | |
Total Non-interest Expense | | | 15,045 | | | | 16,133 | | | | 29,877 | | | | 31,129 | |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 2,867 | | | | 4,440 | | | | 4,998 | | | | 9,539 | |
Income taxes | | | 808 | | | | 1,539 | | | | 1,432 | | | | 3,230 | |
| | | | | | | | | | | | | | | | |
Net Income | | $ | 2,059 | | | $ | 2,901 | | | $ | 3,566 | | | $ | 6,309 | |
| | | | | | | | | | | | | | | | |
| | | | |
Dividends Accrued on Preferred Shares | | | (462 | ) | | | (468 | ) | | | (925 | ) | | | (930 | ) |
Accretion on Preferred Shares | | | (42 | ) | | | (40 | ) | | | (82 | ) | | | (78 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net Income Applicable to Common Shares | | $ | 1,555 | | | $ | 2,393 | | | $ | 2,559 | | | $ | 5,301 | |
| | | | | | | | | | | | | | | | |
| | | | |
Earnings per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.19 | | | $ | 0.29 | | | $ | 0.32 | | | $ | 0.65 | |
Diluted | | $ | 0.19 | | | $ | 0.29 | | | $ | 0.31 | | | $ | 0.65 | |
| | | | |
Core operating earnings per common share*: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.19 | | | $ | 0.29 | | | $ | 0.32 | | | $ | 0.65 | |
Diluted | | $ | 0.19 | | | $ | 0.29 | | | $ | 0.32 | | | $ | 0.65 | |
| | | | |
Average Shares Outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 8,118 | | | | 8,117 | | | | 8,118 | | | | 8,117 | |
Diluted | | | 8,193 | | | | 8,182 | | | | 8,169 | | | | 8,117 | |
* - See Non-GAAP Disclosure Reconciliations
7
Financial Summary and Comparison
First Defiance Financial Corp.
| | | | | | | | | | | | | | | | | | | | | | |
| | | (Unaudited)
Three Months Ended
June 30, | | | (Unaudited)
Six Months Ended
June 30, | |
(dollars in thousands, except per share data) | | 2010 | | | 2009 | | | % change | | | 2010 | | | 2009 | | | % change | |
Summary of Operations | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Tax-equivalent interest income (1) | | $ | 24,655 | | | $ | 25,117 | | | (1.8 | ) | | $ | 49,082 | | | $ | 50,496 | | | (2.8 | ) |
Interest expense | | | 6,788 | | | | 8,643 | | | (21.5 | ) | | | 13,832 | | | | 17,728 | | | (22.0 | ) |
Tax-equivalent net interest income (1) | | | 17,867 | | | | 16,474 | | | 8.5 | | | | 35,250 | | | | 32,768 | | | 7.6 | |
Provision for loan losses | | | 5,440 | | | | 3,965 | | | 37.2 | | | | 12,329 | | | | 6,711 | | | 83.7 | |
Tax-equivalent NII after provision for loan loss (1) | | | 12,427 | | | | 12,509 | | | (0.7 | ) | | | 22,921 | | | | 26,057 | | | (12.0 | ) |
Investment securities gains (losses) | | | (71 | ) | | | (750 | ) | | (90.5 | ) | | | (135 | ) | | | (1,422 | ) | | (90.5 | ) |
Non-interest income (excluding securities gains/losses) | | | 5,862 | | | | 9,109 | | | (35.6 | ) | | | 12,693 | | | | 16,585 | | | (23.5 | ) |
Non-interest expense | | | 15,045 | | | | 16,133 | | | (6.7 | ) | | | 29,877 | | | | 31,129 | | | (4.0 | ) |
Income taxes | | | 808 | | | | 1,539 | | | (47.5 | ) | | | 1,432 | | | | 3,230 | | | (55.7 | ) |
Net Income | | | 2,059 | | | | 2,901 | | | (29.0 | ) | | | 3,566 | | | | 6,309 | | | (43.5 | ) |
Dividends Declared on Preferred Shares | | | (462 | ) | | | (468 | ) | | (1.3 | ) | | | (925 | ) | | | (930 | ) | | (0.5 | ) |
Accretion on Preferred Shares | | | (42 | ) | | | (40 | ) | | 5.0 | | | | (82 | ) | | | (78 | ) | | 5.1 | |
Net Income Applicable to Common Shares | | | 1,555 | | | | 2,393 | | | (35.0 | ) | | | 2,559 | | | | 5,301 | | | (51.7 | ) |
Tax equivalent adjustment (1) | | | 306 | | | | 295 | | | 3.7 | | | | 604 | | | | 552 | | | 9.4 | |
At Period End | | | | | | | | | | | | | | | | | | | | | | |
Assets | | | 2,038,656 | | | | 2,023,563 | | | 0.7 | | | | | | | | | | | | |
Earning assets | | | 1,858,300 | | | | 1,846,689 | | | 0.6 | | | | | | | | | | | | |
Loans | | | 1,571,413 | | | | 1,610,460 | | | (2.4 | ) | | | | | | | | | | | |
Allowance for loan losses | | | 38,852 | | | | 25,840 | | | 50.4 | | | | | | | | | | | | |
Deposits | | | 1,580,520 | | | | 1,553,144 | | | 1.8 | | | | | | | | | | | | |
Stockholders’ equity | | | 238,438 | | | | 232,683 | | | 2.5 | | | | | | | | | | | | |
Average Balances | | | | | | | | | | | | | | | | | | | | | | |
Assets | | | 2,060,925 | | | | 2,027,760 | | | 1.6 | | | | 2,054,716 | | | | 2,006,373 | | | 2.4 | |
Earning assets | | | 1,845,306 | | | | 1,828,272 | | | 0.9 | | | | 1,838,587 | | | | 1,805,144 | | | 1.9 | |
Deposits and interest-bearing liabilities | | | 1,808,944 | | | | 1,778,848 | | | 1.7 | | | | 1,803,674 | | | | 1,757,890 | | | 2.6 | |
Loans | | | 1,551,396 | | | | 1,592,513 | | | (2.6 | ) | | | 1,555,901 | | | | 1,594,553 | | | (2.4 | ) |
Deposits | | | 1,597,820 | | | | 1,552,533 | | | 2.9 | | | | 1,586,979 | | | | 1,533,295 | | | 3.5 | |
Stockholders’ equity | | | 237,076 | | | | 231,397 | | | 2.5 | | | | 236,283 | | | | 230,748 | | | 2.4 | |
Stockholders’ equity / assets | | | 11.50 | % | | | 11.41 | % | | 0.8 | | | | 11.50 | % | | | 11.50 | % | | (0.0 | ) |
Per Common Share Data | | | | | | | | | | | | | | | | | | | | | | |
Net Income | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.19 | | | $ | 0.29 | | | (34.5 | ) | | $ | 0.32 | | | $ | 0.65 | | | (50.8 | ) |
Diluted | | | 0.19 | | | | 0.29 | | | (34.5 | ) | | | 0.31 | | | | 0.65 | | | (52.3 | ) |
| | | | | | |
Dividends | | | — | | | | 0.085 | | | (100.0 | ) | | | — | | | | 0.255 | | | (100.0 | ) |
Market Value: | | | | | | | | | | | | | | | | | | | | | | |
High | | $ | 14.85 | | | $ | 14.25 | | | 4.2 | | | $ | 14.85 | | | $ | 14.25 | | | 4.2 | |
Low | | | 8.53 | | | | 6.10 | | | 39.8 | | | | 8.53 | | | | 3.76 | | | 126.9 | |
Close | | | 8.94 | | | | 13.00 | | | (31.2 | ) | | | 8.94 | | | | 13.00 | | | (31.2 | ) |
Book Value | | | 24.78 | | | | 24.10 | | | 2.8 | | | | 24.78 | | | | 24.10 | | | 2.8 | |
Tangible Book Value | | | 16.85 | | | | 16.19 | | | 4.1 | | | | 16.85 | | | | 16.19 | | | 4.1 | |
Shares outstanding, end of period (000) | | | 8,118 | | | | 8,118 | | | — | | | | 8,118 | | | | 8,118 | | | — | |
Performance Ratios (annualized) | | | | | | | | | | | | | | | | | | | | | | |
Tax-equivalent net interest margin (1) | | | 3.89 | % | | | 3.61 | % | | 7.7 | | | | 3.87 | % | | | 3.66 | % | | 5.8 | |
Return on average assets -GAAP | | | 0.40 | % | | | 0.57 | % | | (30.2 | ) | | | 0.35 | % | | | 0.63 | % | | (44.8 | ) |
Return on average equity- GAAP | | | 3.48 | % | | | 5.03 | % | | (30.7 | ) | | | 3.04 | % | | | 5.51 | % | | (44.8 | ) |
Efficiency ratio (2) -GAAP | | | 63.40 | % | | | 63.06 | % | | 0.5 | | | | 62.32 | % | | | 63.07 | % | | (1.2 | ) |
Effective tax rate | | | 28.18 | % | | | 34.66 | % | | (18.7 | ) | | | 28.65 | % | | | 33.86 | % | | (15.4 | ) |
Dividend payout ratio (basic) | | | 0.00 | % | | | 29.31 | % | | (100.0 | ) | | | 0.00 | % | | | 39.23 | % | | (100.0 | ) |
| (1) | Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35% |
| (2) | Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains or losses, net. |
NM Percentage change not meaningful
8
Non-GAAP Disclosure Reconciliations
First Defiance Financial Corp.
Management believes that the presentation of the non-GAAP financial measures in this release assists investors when comparing results period-to-period in a more meaningful and consistent manner and provides a better measure of results for First Defiance’s ongoing operations.
Core operating earnings are net income adjusted to exclude discontinued operations, merger, integration and restructuring expenses and the results of certain significant transactions not representative of ongoing operations.
Core Operating Earnings
| | | | | | | | | | | | | | |
| | | Three months ended
June 30, | | Six Months Ended
June 30, |
(dollars in thousands, except per share data) | | 2010 | | | 2009 | | 2010 | | | 2009 |
Net Income | | $ | 2,059 | | | $ | 2,901 | | $ | 3,566 | | | $ | 6,309 |
| | | | |
Acquisition related charges | | | 37 | | | | — | | | 37 | | | | — |
Tax effect | | | (13 | ) | | | — | | | (13 | ) | | | — |
| | | | | | | | | | | | | | |
After-tax non-operating items | | | 24 | | | | — | | | 24 | | | | — |
| | | | | | | | | | | | | | |
Core operating earnings | | $ | 2,083 | | | $ | 2,901 | | $ | 3,590 | | | $ | 6,309 |
| | | | | | | | | | | | | | |
Acquisition related charges in 2010 reflect charges associated with the purchase of the group benefits business from Andres, O’Neil & Lowe.
Income from Mortgage Banking
Revenue from sales and servicing of mortgage loans consisted of the following:
| | | | | | | | | | | | | | | | |
| | | Three months ended
June 30, | | | Six Months Ended
June 30, | |
(dollars in thousands) | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | |
Gain from sale of mortgage loans | | $ | 1,212 | | | $ | 2,922 | | | $ | 2,376 | | | $ | 5,735 | |
Mortgage loan servicing revenue (expense): | | | | | | | | | | | | | | | | |
Mortgage loan servicing revenue | | | 754 | | | | 695 | | | | 1,502 | | | | 1,384 | |
Amortization of mortgage servicing rights | | | (410 | ) | | | (1,154 | ) | | | (836 | ) | | | (2,111 | ) |
Mortgage servicing rights valuation adjustments | | | (571 | ) | | | 1,520 | | | | (250 | ) | | | 1,689 | |
| | | | | | | | | | | | | | | | |
| | | (227 | ) | | | 1,061 | | | | 416 | | | | 962 | |
| | | | | | | | | | | | | | | | |
Total revenue from sale and servicing of mortgage loans | | $ | 985 | | | $ | 3,983 | | | $ | 2,792 | | | $ | 6,697 | |
| | | | | | | | | | | | | | | | |
9
Yield Analysis
First Defiance Financial Corp.
| | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | |
| | | (dollars in thousands) | |
| | | 2010 | | | 2009 | |
| | | Average
Balance | | Interest(1) | | Yield
Rate(2) | | | Average
Balance | | Interest(1) | | Yield
Rate(2) | |
Interest-earning assets: | | | | | | | | | | | | | | | | | | |
Loans receivable | | $ | 1,551,396 | | $ | 22,514 | | 5.82 | % | | $ | 1,592,513 | | $ | 23,116 | | 5.82 | % |
Securities | | | 156,263 | | | 1,838 | | 4.78 | % | | | 130,663 | | | 1,739 | | 5.26 | % |
Interest Bearing Deposits | | | 116,271 | | | 69 | | 0.24 | % | | | 83,720 | | | 33 | | 0.16 | % |
FHLB stock | | | 21,376 | | | 234 | | 4.39 | % | | | 21,376 | | | 229 | | 4.30 | % |
| | | | | | | | | | | | | | | | | | |
Total interest-earning assets | | | 1,845,306 | | | 24,655 | | 5.36 | % | | | 1,828,272 | | | 25,117 | | 5.50 | % |
Non-interest-earning assets | | | 215,619 | | | | | | | | | 199,488 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,060,925 | | | | | | | | $ | 2,027,760 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Deposits and Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Interest bearing deposits | | $ | 1,404,202 | | $ | 5,126 | | 1.46 | % | | $ | 1,377,317 | | $ | 6,859 | | 2.00 | % |
FHLB advances and other | | | 126,910 | | | 1,220 | | 3.86 | % | | | 146,951 | | | 1,279 | | 3.49 | % |
Other Borrowings | | | 47,986 | | | 115 | | 0.96 | % | | | 43,122 | | | 136 | | 1.27 | % |
Subordinated debentures | | | 36,228 | | | 327 | | 3.62 | % | | | 36,242 | | | 369 | | 4.08 | % |
| | | | | | | | | | | | | | | | | | |
Total interest-bearing liabilities | | | 1,615,326 | | | 6,788 | | 1.69 | % | | | 1,603,632 | | | 8,643 | | 2.16 | % |
Non-interest bearing deposits | | | 193,618 | | | — | | — | | | | 175,216 | | | — | | — | |
| | | | | | | | | | | | | | | | | | |
Total including non-interest-bearing demand deposits | | | 1,808,944 | | | 6,788 | | 1.51 | % | | | 1,778,848 | | | 8,643 | | 1.95 | % |
Other non-interest-bearing liabilities | | | 14,905 | | | | | | | | | 17,515 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | 1,823,849 | | | | | | | | | 1,796,363 | | | | | | |
Stockholders’ equity | | | 237,076 | | | | | | | | | 231,397 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 2,060,925 | | | | | | | | $ | 2,027,760 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Net interest income; interest rate spread | | | | | $ | 17,867 | | 3.67 | % | | | | | $ | 16,474 | | 3.34 | % |
| | | | | | | | | | | | | | | | | | |
Net interest margin (3) | | | | | | | | 3.89 | % | | | | | | | | 3.61 | % |
| | | | | | | | | | | | | | | | | | |
Average interest-earning assets to average interest bearing liabilities | | | | | | | | 114 | % | | | | | | | | 114 | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, | |
| | | 2010 | | | 2009 | |
| | | Average
Balance | | Interest(1) | | Yield
Rate(2) | | | Average
Balance | | Interest(1) | | Yield
Rate(2) | |
Interest-earning assets: | | | | | | | | | | | | | | | | | | |
Loans receivable | | $ | 1,555,901 | | $ | 44,950 | | 5.83 | % | | $ | 1,594,553 | | $ | 46,521 | | 5.88 | % |
Securities | | | 148,955 | | | 3,549 | | 4.86 | % | | | 124,988 | | | 3,460 | | 5.51 | % |
Interest Bearing Deposits | | | 112,355 | | | 130 | | 0.23 | % | | | 64,227 | | | 47 | | 0.15 | % |
FHLB stock | | | 21,376 | | | 453 | | 4.27 | % | | | 21,376 | | | 468 | | 4.42 | % |
| | | | | | | | | | | | | | | | | | |
Total interest-earning assets | | | 1,838,587 | | | 49,082 | | 5.38 | % | | | 1,805,144 | | | 50,496 | | 5.61 | % |
Non-interest-earning assets | | | 216,129 | | | | | | | | | 201,229 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,054,716 | | | | | | | | $ | 2,006,373 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Deposits and Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Interest bearing deposits | | $ | 1,398,073 | | $ | 10,524 | | 1.52 | % | | $ | 1,362,747 | | $ | 14,042 | | 2.08 | % |
FHLB advances and other | | | 134,334 | | | 2,438 | | 3.66 | % | | | 147,021 | | | 2,598 | | 3.56 | % |
Other Borrowings | | | 46,133 | | | 220 | | 0.96 | % | | | 41,327 | | | 293 | | 1.43 | % |
Subordinated debentures | | | 36,228 | | | 650 | | 3.62 | % | | | 36,247 | | | 795 | | 4.42 | % |
| | | | | | | | | | | | | | | | | | |
Total interest-bearing liabilities | | | 1,614,768 | | | 13,832 | | 1.72 | % | | | 1,587,342 | | | 17,728 | | 2.25 | % |
Non-interest bearing deposits | | | 188,906 | | | — | | — | | | | 170,548 | | | — | | — | |
| | | | | | | | | | | | | | | | | | |
Total including non-interest-bearing demand deposits | | | 1,803,674 | | | 13,832 | | 1.55 | % | | | 1,757,890 | | | 17,728 | | 2.03 | % |
Other non-interest-bearing liabilities | | | 14,759 | | | | | | | | | 17,735 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | 1,818,433 | | | | | | | | | 1,775,625 | | | | | | |
Stockholders’ equity | | | 236,283 | | | | | | | | | 230,748 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 2,054,716 | | | | | | | | $ | 2,006,373 | | | | | | |
| | | | | | | | | | | | | | | | | | |
Net interest income; interest rate spread | | | | | $ | 35,250 | | 3.66 | % | | | | | $ | 32,768 | | 3.36 | % |
| | | | | | | | | | | | | | | | | | |
Net interest margin (3) | | | | | | | | 3.87 | % | | | | | | | | 3.66 | % |
| | | | | | | | | | | | | | | | | | |
Average interest-earning assets to average interest bearing liabilities | | | | | | | | 114 | % | | | | | | | | 114 | % |
| | | | | | | | | | | | | | | | | | |
| (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) | Net interest margin is net interest income divided by average interest-earning assets. |
10
Selected Quarterly Information
First Defiance Financial Corp.
| | | | | | | | | | | | | | | | | | | | |
(dollars in thousands, except per share data) | | 2nd Qtr 2010 | | | 1st Qtr 2010 | | | 4th Qtr 2009 | | | 3rd Qtr 2009 | | | 2nd Qtr 2009 | |
Summary of Operations | | | | | | | | | | | | | | | | | | | | |
Tax-equivalent interest income (1) | | $ | 24,655 | | | $ | 24,427 | | | $ | 25,434 | | | $ | 25,796 | | | $ | 25,117 | |
Interest expense | | | 6,788 | | | | 7,044 | | | | 7,614 | | | | 7,914 | | | | 8,643 | |
Tax-equivalent net interest income (1) | | | 17,867 | | | | 17,383 | | | | 17,820 | | | | 17,882 | | | | 16,474 | |
Provision for loan losses | | | 5,440 | | | | 6,889 | | | | 8,470 | | | | 8,051 | | | | 3,965 | |
Tax-equivalent NII after provision for loan losses (1) | | | 12,427 | | | | 10,494 | | | | 9,350 | | | | 9,831 | | | | 12,509 | |
Investment securities gains (losses) | | | (71 | ) | | | (64 | ) | | | (1,394 | ) | | | (840 | ) | | | (750 | ) |
Non-interest income (excluding securities gains/losses) | | | 5,862 | | | | 6,830 | | | | 6,970 | | | | 6,396 | | | | 9,109 | |
Non-interest expense | | | 15,045 | | | | 14,832 | | | | 14,609 | | | | 14,786 | | | | 16,133 | |
Income taxes | | | 808 | | | | 624 | | | | (525 | ) | | | (37 | ) | | | 1,539 | |
Net income | | | 2,059 | | | | 1,506 | | | | 555 | | | | 329 | | | | 2,901 | |
Dividends Declared on Preferred Shares | | | (462 | ) | | | (463 | ) | | | (447 | ) | | | (473 | ) | | | (468 | ) |
Accretion on Preferred Shares | | | (42 | ) | | | (40 | ) | | | (41 | ) | | | (40 | ) | | | (40 | ) |
Net Income Applicable to Common Shares | | | 1,555 | | | | 1,003 | | | | 67 | | | | (184 | ) | | | 2,393 | |
Tax equivalent adjustment (1) | | | 306 | | | | 298 | | | | 287 | | | | 309 | | | | 295 | |
At Period End | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,038,656 | | | $ | 2,058,775 | | | $ | 2,057,523 | | | $ | 2,018,598 | | | $ | 2,023,563 | |
Earning assets | | | 1,858,300 | | | | 1,884,650 | | | | 1,879,725 | | | | 1,845,134 | | | | 1,846,689 | |
Loans | | | 1,571,413 | | | | 1,576,602 | | | | 1,617,122 | | | | 1,623,627 | | | | 1,610,460 | |
Allowance for loan losses | | | 38,852 | | | | 38,980 | | | | 36,547 | | | | 31,248 | | | | 25,840 | |
Deposits | | | 1,580,520 | | | | 1,599,584 | | | | 1,580,226 | | | | 1,543,085 | | | | 1,553,144 | |
Stockholders’ equity | | | 238,438 | | | | 235,655 | | | | 234,086 | | | | 234,529 | | | | 232,683 | |
Stockholders’ equity / assets | | | 11.70 | % | | | 11.45 | % | | | 11.38 | % | | | 11.62 | % | | | 11.50 | % |
Goodwill | | | 57,556 | | | | 56,585 | | | | 56,585 | | | | 56,585 | | | | 56,585 | |
Average Balances | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,060,925 | | | $ | 2,048,506 | | | $ | 2,058,219 | | | $ | 2,029,970 | | | $ | 2,027,760 | |
Earning assets | | | 1,845,306 | | | | 1,831,867 | | | | 1,852,401 | | | | 1,826,400 | | | | 1,828,272 | |
Deposits and interest-bearing liabilities | | | 1,808,944 | | | | 1,798,408 | | | | 1,805,090 | | | | 1,778,223 | | | | 1,778,848 | |
Loans | | | 1,551,396 | | | | 1,560,405 | | | | 1,600,265 | | | | 1,613,529 | | | | 1,592,513 | |
Deposits | | | 1,597,820 | | | | 1,576,140 | | | | 1,572,399 | | | | 1,550,369 | | | | 1,552,533 | |
Stockholders’ equity | | | 237,076 | | | | 235,492 | | | | 235,152 | | | | 234,241 | | | | 231,397 | |
Stockholders’ equity / assets | | | 11.50 | % | | | 11.50 | % | | | 11.43 | % | | | 11.54 | % | | | 11.41 | % |
Per Common Share Data | | | | | | | | | | | | | | | | | | | | |
Net Income: | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.19 | | | $ | 0.12 | | | $ | 0.01 | | | $ | (0.02 | ) | | $ | 0.29 | |
Diluted | | | 0.19 | | | | 0.12 | | | | 0.01 | | | | (0.02 | ) | | | 0.29 | |
Dividends | | | — | | | | — | | | | — | | | | 0.04 | | | | 0.09 | |
Market Value: | | | | | | | | | | | | | | | | | | | | |
High | | $ | 14.85 | | | $ | 12.33 | | | $ | 18.93 | | | $ | 18.33 | | | $ | 14.25 | |
Low | | | 8.53 | | | | 9.20 | | | | 10.06 | | | | 12.00 | | | | 6.10 | |
Close | | | 8.94 | | | | 10.12 | | | | 11.29 | | | | 14.91 | | | | 13.00 | |
Book Value | | | 24.78 | | | | 24.45 | | | | 24.26 | | | | 24.32 | | | | 24.10 | |
Shares outstanding, end of period (in thousands) | | | 8,118 | | | | 8,117 | | | | 8,118 | | | | 8,118 | | | | 8,118 | |
Performance Ratios (annualized) | | | | | | | | | | | | | | | | | | | | |
Tax-equivalent net interest margin (1) | | | 3.89 | % | | | 3.85 | % | | | 3.82 | % | | | 3.88 | % | | | 3.61 | % |
Return on average assets | | | 0.40 | % | | | 0.30 | % | | | 0.11 | % | | | 0.06 | % | | | 0.57 | % |
Return on average equity | | | 3.48 | % | | | 2.59 | % | | | 0.94 | % | | | 0.56 | % | | | 5.03 | % |
Efficiency ratio (2) | | | 63.40 | % | | | 61.26 | % | | | 58.93 | % | | | 60.90 | % | | | 63.06 | % |
Effective tax rate | | | 28.18 | % | | | 29.30 | % | | | -1750.00 | % | | | -12.67 | % | | | 34.66 | % |
Common dividend payout ratio (basic) | | | 0.00 | % | | | 0.00 | % | | | 0.00 | % | | | -200.00 | % | | | 29.31 | % |
| (1) | Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35% |
| (2) | Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains, net. |
11
Selected Quarterly Information
First Defiance Financial Corp.
| | | | | | | | | | | | | | | | | | | | |
(dollars in thousands, except per share data) | | 2nd Qtr 2010 | | | 1st Qtr 2010 | | | 4th Qtr 2009 | | | 3rd Qtr 2009 | | | 2nd Qtr 2009 | |
Loan Portfolio Composition | | | | | | | | | | | | | | | | | | | | |
One to four family residential real estate | | $ | 217,603 | | | $ | 222,099 | | | $ | 227,592 | | | $ | 233,958 | | | $ | 238,000 | |
Construction | | | 43,333 | | | | 46,369 | | | | 48,625 | | | | 53,605 | | | | 44,670 | |
Commercial real estate | | | 790,521 | | | | 797,449 | | | | 806,890 | | | | 802,434 | | | | 768,636 | |
Commercial | | | 364,281 | | | | 352,923 | | | | 379,408 | | | | 371,881 | | | | 382,434 | |
Consumer finance | | | 28,961 | | | | 31,718 | | | | 34,105 | | | | 36,416 | | | | 38,074 | |
Home equity and improvement | | | 140,969 | | | | 144,826 | | | | 147,977 | | | | 150,379 | | | | 151,213 | |
| | | | | | | | | | | | | | | | | | | | |
Total loans | | | 1,585,668 | | | | 1,595,384 | | | | 1,644,597 | | | | 1,648,673 | | | | 1,623,027 | |
Less: | | | | | | | | | | | | | | | | | | | | |
Loans in process | | | 13,283 | | | | 17,794 | | | | 26,494 | | | | 23,957 | | | | 11,602 | |
Deferred loan origination fees | | | 972 | | | | 988 | | | | 981 | | | | 1,089 | | | | 965 | |
Allowance for loan loss | | | 38,852 | | | | 38,980 | | | | 36,547 | | | | 31,248 | | | | 25,840 | |
| | | | | | | | | | | | | | | | | | | | |
Net Loans | | $ | 1,532,561 | | | $ | 1,537,622 | | | $ | 1,580,575 | | | $ | 1,592,379 | | | $ | 1,584,620 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Allowance for loan loss activity | | | | | | | | | | | | | | | | | | | | |
Beginning allowance | | | 38,980 | | | | 36,547 | | | $ | 31,248 | | | $ | 25,840 | | | $ | 25,694 | |
Provision for loan losses | | | 5,440 | | | | 6,889 | | | | 8,470 | | | | 8,051 | | | | 3,965 | |
Credit loss charge-offs: | | | | | | | | | | | | | | | | | | | | |
One to four family residential real estate | | | 1,135 | | | | 326 | | | | 884 | | | | 744 | | | | 505 | |
Commercial real estate | | | 1,243 | | | | 3,191 | | | | 1,912 | | | | 1,152 | | | | 2,066 | |
Commercial | | | 3,153 | | | | 735 | | | | 354 | | | | 658 | | | | 950 | |
Consumer finance | | | 16 | | | | 25 | | | | 75 | | | | 39 | | | | 83 | |
Home equity and improvement | | | 156 | | | | 399 | | | | 134 | | | | 196 | | | | 301 | |
| | | | | | | | | | | | | | | | | | | | |
Total charge-offs | | | 5,703 | | | | 4,676 | | | | 3,359 | | | | 2,789 | | | | 3,905 | |
Total recoveries | | | 135 | | | | 220 | | | | 188 | | | | 146 | | | | 86 | |
| | | | | | | | | | | | | | | | | | | | |
Net charge-offs (recoveries) | | | 5,568 | | | | 4,456 | | | | 3,171 | | | | 2,643 | | | | 3,819 | |
| | | | | | | | | | | | | | | | | | | | |
Ending allowance | | $ | 38,852 | | | $ | 38,980 | | | $ | 36,547 | | | $ | 31,248 | | | $ | 25,840 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Credit Quality | | | | | | | | | | | | | | | | | | | | |
Non-accrual loans | | $ | 31,804 | | | $ | 33,567 | | | $ | 41,191 | | | $ | 35,490 | | | $ | 35,528 | |
Restructured loans, accruing | | | 8,918 | | | | 7,023 | | | | 6,715 | | | | 4,574 | | | | 4,845 | |
| | | | | | | | | | | | | | | | | | | | |
Total non-performing loans (1) | | | 40,722 | | | | 40,590 | | | | 47,906 | | | | 40,064 | | | | 40,373 | |
Real estate owned (REO) | | | 12,735 | | | | 12,768 | | | | 13,527 | | | | 9,352 | | | | 8,567 | |
| | | | | | | | | | | | | | | | | | | | |
Total non-performing assets (2) | | $ | 53,457 | | | $ | 53,358 | | | $ | 61,433 | | | $ | 49,416 | | | $ | 48,940 | |
| | | | | | | | | | | | | | | | | | | | |
Net charge-offs | | | 5,568 | | | | 4,456 | | | | 3,171 | | | | 2,643 | | | | 3,819 | |
| | | | | |
Allowance for loan losses / loans | | | 2.47 | % | | | 2.47 | % | | | 2.26 | % | | | 1.92 | % | | | 1.60 | % |
Allowance for loan losses / non-performing assets | | | 72.68 | % | | | 73.05 | % | | | 59.49 | % | | | 63.23 | % | | | 52.80 | % |
Allowance for loan losses / non-performing loans | | | 95.41 | % | | | 96.03 | % | | | 76.29 | % | | | 78.00 | % | | | 64.00 | % |
Non-performing assets / loans plus REO | | | 3.37 | % | | | 3.36 | % | | | 3.77 | % | | | 3.03 | % | | | 3.02 | % |
Non-performing assets / total assets | | | 2.62 | % | | | 2.59 | % | | | 2.99 | % | | | 2.45 | % | | | 2.42 | % |
Net charge-offs / average loans (annualized) | | | 1.44 | % | | | 1.14 | % | | | 0.79 | % | | | 0.66 | % | | | 0.96 | % |
| | | | | |
Deposit Balances | | | | | | | | | | | | | | | | | | | | |
Non-interest-bearing demand deposits | | $ | 190,140 | | | $ | 187,231 | | | $ | 189,132 | | | $ | 174,145 | | | $ | 180,035 | |
Interest-bearing demand deposits and money market | | | 517,170 | | | | 525,311 | | | | 499,575 | | | | 477,566 | | | | 456,177 | |
Savings deposits | | | 140,473 | | | | 138,364 | | | | 130,156 | | | | 132,333 | | | | 135,821 | |
Retail time deposits less than $100,000 | | | 527,421 | | | | 539,313 | | | | 550,172 | | | | 544,957 | | | | 568,595 | |
Retail time deposits greater than $100,000 | | | 158,069 | | | | 161,071 | | | | 163,838 | | | | 166,787 | | | | 165,401 | |
National/Brokered time deposits | | | 47,247 | | | | 48,294 | | | | 47,353 | | | | 47,297 | | | | 47,115 | |
| | | | | | | | | | | | | | | | | | | | |
Total deposits | | $ | 1,580,520 | | | $ | 1,599,584 | | | $ | 1,580,226 | | | $ | 1,543,085 | | | $ | 1,553,144 | |
| | | | | | | | | | | | | | | | | | | | |
| (1) | Non-performing loans consist of non-accrual loans that are contractually past due 90 days or more and loans that are deemed impaired. |
| (2) | Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof. |
12
Loan Delinquency Information
First Defiance Financial Corp.
| | | | | | | | | | | | | | | |
(dollars in thousands) | | Total Balance | | Current | | 30 to 89 days
past due | | Non Accrual
Loans | | Troubled Debt
Restructuring |
| | | | | |
June 30, 2010 | | | | | | | | | | | | | | | |
One to four family residential real estate | | $ | 217,603 | | $ | 202,472 | | $ | 4,790 | | $ | 6,457 | | $ | 3,884 |
Construction | | | 43,333 | | | 43,079 | | | — | | | 254 | | | — |
Commercial real estate | | | 790,521 | | | 763,913 | | | 4,057 | | | 17,912 | | | 4,639 |
Commercial | | | 364,281 | | | 356,500 | | | 508 | | | 6,898 | | | 375 |
Consumer finance | | | 28,961 | | | 28,767 | | | 177 | | | 17 | | | — |
Home equity and improvement | | | 140,969 | | | 139,219 | | | 1,464 | | | 266 | | | 20 |
| | | | | | | | | | | | | | | |
Total loans | | $ | 1,585,668 | | $ | 1,533,950 | | $ | 10,996 | | $ | 31,804 | | $ | 8,918 |
| | | | | | | | | | | | | | | |
| | | | | |
March 31, 2010 | | | | | | | | | | | | | | | |
One to four family residential real estate | | $ | 222,099 | | $ | 207,733 | | $ | 4,749 | | $ | 6,572 | | $ | 3,045 |
Construction | | | 46,369 | | | 46,129 | | | 65 | | | 175 | | | — |
Commercial real estate | | | 797,449 | | | 768,335 | | | 6,962 | | | 18,241 | | | 3,911 |
Commercial | | | 352,923 | | | 338,513 | | | 6,866 | | | 7,498 | | | 46 |
Consumer finance | | | 31,718 | | | 31,489 | | | 170 | | | 59 | | | — |
Home equity and improvement | | | 144,826 | | | 142,598 | | | 1,185 | | | 1,022 | | | 21 |
| | | | | | | | | | | | | | | |
Total loans | | $ | 1,595,384 | | $ | 1,534,797 | | $ | 19,997 | | $ | 33,567 | | $ | 7,023 |
| | | | | | | | | | | | | | | |
| | | | | |
December 31, 2009 | | | | | | | | | | | | | | | |
One to four family residential real estate | | $ | 227,592 | | $ | 215,209 | | $ | 4,333 | | $ | 5,349 | | $ | 2,701 |
Construction | | | 48,625 | | | 47,950 | | | — | | | 675 | | | — |
Commercial real estate | | | 809,890 | | | 775,604 | | | 3,280 | | | 24,042 | | | 3,964 |
Commercial | | | 379,408 | | | 367,592 | | | 1,151 | | | 10,615 | | | 50 |
Consumer finance | | | 34,105 | | | 33,669 | | | 377 | | | 59 | | | — |
Home equity and improvement | | | 147,977 | | | 145,481 | | | 2,045 | | | 451 | | | — |
| | | | | | | | | | | | | | | |
Total loans | | $ | 1,647,597 | | $ | 1,585,505 | | $ | 11,186 | | $ | 41,191 | | $ | 6,715 |
| | | | | | | | | | | | | | | |
| | | | | |
June 30, 2009 | | | | | | | | | | | | | | | |
One to four family residential real estate | | $ | 238,000 | | $ | 223,846 | | $ | 5,594 | | $ | 5,541 | | $ | 3,019 |
Construction | | | 44,670 | | | 44,416 | | | 194 | | | 60 | | | — |
Commercial real estate | | | 768,636 | | | 727,983 | | | 13,212 | | | 25,672 | | | 1,769 |
Commercial | | | 382,434 | | | 375,007 | | | 3,781 | | | 3,589 | | | 57 |
Consumer finance | | | 38,074 | | | 37,595 | | | 440 | | | 39 | | | — |
Home equity and improvement | | | 151,213 | | | 147,975 | | | 2,611 | | | 627 | | | — |
| | | | | | | | | | | | | | | |
Total loans | | $ | 1,623,027 | | $ | 1,556,822 | | $ | 25,832 | | $ | 35,528 | | $ | 4,845 |
| | | | | | | | | | | | | | | |
13
