EXHIBIT 99.1
For Immediate Release Contact: William J. Small
Chairman, President and CEO
First Defiance Financial Corp.
(419) 782-5015
bsmall@first-fed.com
--------------------
FIRST DEFIANCE ANNOUNCES SECOND QUARTER EARNINGS
HIGHLIGHTS
o Second quarter 2003 net income was $2.9 million or $.46 per diluted
share.
o Gains from sale of mortgage loans totaled $2.5 million for the 2003
second quarter and $4.3 million for the six month period ended June
30, 2003, increases of 358% and 301% respectively from 2002 amounts.
o Asset quality remains strong. Net charge-offs just $172,000 for 2003
second quarter. Year-to-date charge-offs just $79,000 after
first-quarter net recoveries.
o Total assets grow to $1.05 billion following June 2003 branch
acquisition.
o Net interest margin declines just 1 basis point from 2003 first
quarter.
DEFIANCE, OHIO (July 21, 2003) -
FlashResults
First Defiance Financial Corp. (Nasdaq: FDEF)
(Numbers in Thousands, Except Per Share Data)
2Q 2003 1Q 2003 2Q 2002
Tax-equivalent Net Interest Income $7,074 $6,661 $5,908
Net Income from Continuing Operations $2,879 $2,718 $1,386
EPS from Continuing Operations $ .46 $ .43 $ .21
Net Income $2,879 $2,718 $8,718
Net Income per Share $ .46 $ .43 $ 1.30
First Defiance Financial Corp. (NASDAQ: FDEF) today announced net income of
$2.9 million or $.46 per diluted share for the quarter ended June 30, 2003
compared to $8.7 million or $1.30 per share for the second quarter of 2002. The
2002 amount includes $7.3 million ($1.09 per share) of income from discontinued
operations related primarily to the gain from the sale of the Company's Leader
Mortgage subsidiary (The Leader) to US Bank on April 1, 2002. First Defiance's
income from continuing operations for the second quarter of 2002 was $1.4
million or $0.21 per share.
Net income for the six-month period ended June 30, 2003 was $5.6 million or
$0.89 per share compared to $11.4 million or $1.71 for the same period in 2002.
The 2002 amount includes discontinued operations of $9.3 million or $1.46 per
share. Income from continuing operations for the first six months of 2002 before
the cumulative effect of a change in accounting for goodwill was $2.3 million or
$0.34 per share.
The results for the second quarter of 2003 include 24 days of operations of
three branches that First Defiance acquired on June 6, 2003 from RFC Banking
Company, a subsidiary of Rurban Financial Corp. Those branches, which are
located in Findlay, Ottawa and McComb, Ohio, added $87.2 million in loans and
$165.7 million in deposits to First Defiance's balance sheet.
Continuing Operations Increase Due Primarily to Mortgage Gains, Increase in Net
Interest Income
The increase in income from continuing operations in 2003 compared to 2002
for both the second quarter period and the six month period is due in part to a
large increase in gains from the sale of mortgage loans. Gains from the sale of
mortgage loans totaled $2.5 million for the second quarter of 2003 compared to
$549,000 for the second quarter of 2002, an increase of 358.1%. For the
year-to-date period, gains from the sale of mortgage loans totaled $4.3 million
compared to $1.1 million during the first half of 2002, an increase of 301.5%.
"Our mortgage origination activity for the first six months has been
amazing," said William J. Small, First Defiance Chairman, President and Chief
Executive Officer. "We originated a total of 1,890 mortgages during the first
half of 2003 with balances totaling $186.5 million. That compares to 793
mortgages with balances of just $75.0 million originated during the first two
quarters of 2002. It's a tribute to our lenders and to our loan-processing
department that we've handled this kind of volume without significant increases
in staffing. We also have improved our pipeline management and are realizing
more efficient pricing on the sale of the loans and therefore better gains."
In addition to the increase from mortgage loan sales, First Defiance's net
interest income for the three months ended June 30, 2003 increased to $6.8
million from $5.6 million for the same period in 2002. This increase is due to
the growth in loans outstanding, which averaged $633.8 million for the 2003
second quarter compared to $511.2 million for the same period in 2002, and to a
substantial decline in the cost of funds between the 2002 and 2003 second
quarters. The growth in loans has been primarily in the commercial loan and
non-residential real estate loan categories, which increased from $80.8 million
and $191.5, million respectively, at June 30, 2002 to $107.5 million and $272.4
million at June 30, 2003, excluding the loans acquired as part of the branch
acquisition. An additional $16.8 million of commercial loans and $35.4 million
of non-residential real estate loans were acquired as part of that branch
transaction. The growth in loan balances over the last year improved the overall
mix of the First Defiance balance sheet as it was funded with excess cash
realized following the sale of The Leader. Interest-earning deposits on First
Defiance's balance sheet were $96.3 million for the second
quarter of 2002 immediately following the sale of The Leader at a yield of just
1.70%. With the growth in loans, the average balance of interest-earning
deposits has dropped to just $24.7 million for the second quarter of 2003.
The increased interest income from the improved asset mix has been
partially offset by lower yields in both the loan and investment portfolios. The
tax-equivalent yield on loans has declined from 7.17% for the quarter ended June
30, 2002 to 6.35% for the same period in 2003. Also, the tax equivalent yield on
the Company's investment portfolio dropped 59 basis points, from 5.43% for the
three months ended June 30, 2002 to 4.84% for the three months ended June 30,
2003. During that same period, the Company's cost of deposits dropped 84 basis
points, to 2.27% for the three months ended June 30, 2003 from 3.11% for the
quarter ended June 30, 2002. Also, the average cost of Federal Home Loan Bank
Advances, which are primarily fixed rate, dropped to 4.91% for the three months
ended June 30, 2003 from 5.16% for the three months ended June 30, 2002 due to
the addition of several lower cost advances during late 2002 and early 2003.
Overall, First Defiance's tax-equivalent net interest margin increased to 3.36%
for the 2003 second quarter from 2.99% in the same period in 2002.
The 3.36% net interest margin represented just a one basis point drop from
the 3.37% net interest margin reported for the previous quarterly period ended
March 31, 2003. The slight quarter over quarter decline is primarily the result
of an increase in low yielding liquidity securities, primarily interest-earning
deposits, which increased from an average balance of $6.9 million in the 2003
first quarter to $24.7 million in the 2003 second quarter. That increase was
caused by accelerated prepayments in the securities portfolio and liquidity
acquired as part of the branch acquisition. Overall, comparing the 2003 second
quarter to the 2003 first quarter, yields on earning assets fell 19 basis
points, while the cost of funds dropped 24 basis points.
"While our margin has held up fairly well in this interest rate environment
compared with prior periods, it continues to be a concern," commented Mr. Small.
"This rate environment has generated substantial earnings for us in the mortgage
loan area, but it has also caused our net interest margin to be lower than where
we thought it would be based on the change in mix of our balance sheet. Our
expectation is that interest rates will remain low and that our margin will stay
in the same general range through the rest of 2003. While we believe mortgage
volumes will continue to be strong through at least the third quarter, it will
be a challenge for us to maintain our earnings at this level in this interest
rate environment once those mortgage volumes return to more normal levels."
Credit Quality Remains Good, Non-Interest Income Grows
First Defiance's provision for loan losses for the 2003 second quarter was
$353,000 compared to $156,000 for the same period in 2002. Non-performing loans
and non-performing assets were both $3.3 million at June 30, 2003, both $2.8
million at March 31, 2003 and $2.5 million and $2.7 million, respectively, at
December 31, 2002. Net charge-offs for the 2003 second quarter were $172,000,
compared to $61,000 for the same period of 2002. Net charge-offs to average
loans was just 11 basis points (annualized) for the 2003 second quarter.
"We continue to be very encouraged by the credit quality of our loan
portfolio," said Mr. Small. "Our non-performing loans have remained low in a
very soft economy and our charge-offs continue to be minimal. We also have
conservatively accounted for the loans we acquired as part of our branch
acquisition, discounting them by nearly $3 million as part of the allocation of
the purchase price of the acquisition."
Non-interest income for the three months ended June 30, 2003 totaled $5.3
million, which included the $2.5 million in gains from the sale of mortgage
loans and an additional $288,000 of gains from the sale of securities. During
the same period of 2002, non-interest income totaled $2.7 million of which
$549,000 was due to gain from sale of mortgages. There were no securities gains
in the second quarter of 2002. Excluding mortgage and securities gains,
non-interest income increased from $2.2 million for the three months ended June
30, 2002 to $2.5 million for the same period of 2003. Service fee income
increased by $178,000 or 18.6% between those periods, while commission income
from insurance and securities sales increased by $140,000 or 16.9%.
Mortgage Servicing Amortization, Impairment Expense Increases
Non-interest expense increased to $7.7 million for the three months ended
June 30, 2003 from $6.3 million for the same period in 2002, an increase of
22.0%. Of the increase, $619,000 was due to an increase in the amortization of
mortgage servicing rights. In addition, First Defiance recorded $366,000 of
impairment of mortgage servicing rights during the 2003 second quarter, due to a
decline in the market value of the Company's mortgage servicing portfolio in the
face of falling interest rates. There was $168,000 of impairment recorded in the
second quarter of 2002. Excluding amortization and impairment of mortgage
servicing rights, non-interest expense increased by $571,000 or 9.5%.
Compensation and benefits increased $482,000 or 13.8% between the two periods.
The increase in compensation is due to wage increases of 4%, an addition of 13
staff members between June 30, 2002 and June 30, 2003 (excluding the branch
acquisition), $58,000 in compensation expense related to the new branches for
the 26 day period they were in operations, and a $139,000 increase (27%,
including addition of new employees) in group health insurance costs.
Year-to-Date Results
For the year-to-date period ended June 30, 2003, net interest income
increased to $13.3 million from $11.3 million. That increase is due to
significant growth in interest-earning assets as a result of the sale of The
Leader and the reinvestment of the proceeds from that sale. Net interest margin
for the six-month period ended June 30, 2003 was 3.37% compared to 3.43% for the
same six-month period in 2002.
Provision for loan losses for the first half of 2003 totaled $688,000
compared to $738,000 for the first half of 2002. Because of net recoveries of
$93,000 in the 2003 first quarter, First Defiance's net charge-offs for the
first six months of 2003 were just $79,000, compared to $258,000 for the first
half of 2002. Net charge-offs to average loans for the first six months of 2003
were just one basis point (annualized).
Non-interest income for the first six months of 2003 was $10.1 million
compared to $5.2 million for the first six months of 2002. Excluding gains from
mortgage sales of $4.3 million and $1.1 million for the first six months of 2003
and 2002, respectively, and gains from sale of securities of $919,000 in 2003
and a loss of $15,000 in 2002, non-interest income increased to $4.9 million
during the first six months of 2003 from $4.1 million in the same period of
2002. Service fees increased by $396,000 to $2.1 million in the first half of
2003 from $1.8 million in 2002 and commissions from insurance and securities
sales increased to $1.9 million in the first half of 2003 from $1.7 million for
2002.
Non-interest expense for the six-month period ended June 30, 2003 was $14.7
million compared to $12.3 million for the first half of 2002, an increase of
19.6%. The $2.4 million increase included an increase in amortization and
impairment of mortgage servicing rights of $1.4 million, to $1.9 million from
$529,000. Excluding the impact of mortgage servicing rights, non-interest
expense increased by $1.1 million, or 9.0%. Most of the remaining increase was
in compensation and benefits, which increased to $7.7 million for the first half
of 2003 from $6.8 million during the same period in 2002.
Acquisition Has Minimal Impact on Quarter, YTD Results; Assets Exceed $1 Billion
The acquisition of the three branches had only a minor impact on the
results of the quarter, as the transaction was completed in June and accounted
for less than one month's activity. In total as a result of the acquisition, net
interest income increased by $256,000, non-interest income increased by $18,000
and non-interest expense increased by $109,000, including $8,000 of amortization
of the core deposit intangible.
As of June 30, 2003, First Defiance reported total assets of $1.05 billion,
total loans of $700.1 million, total deposits of $751.7 million and
stockholders' equity of $121.6 million. At December 31, 2002, total assets were
$884.2 million, total loans were $576.4 million, total deposits were $599.6
million and stockholders' equity was $120.1 million. As part of the branch
acquisition, First Defiance's goodwill increased by $15.9 million and the
Company also recorded a core deposit intangible of $772,000. The addition of
those intangible assets caused the Company's tangible book value per share to
fall from $18.35 at March 31, 2003 to $16.11 at June 30, 2003.
Outlook For Balance of 2003
"We've been very pleased with what we've accomplished during the first-half
of 2003," commented Mr. Small. "Our strategy has been to grow our community
banking presence through acquisitions and through organic loan growth and we
have been successful in both of those areas. The acquisition of the three
branches from RFC was well executed by our operations staff and we look forward
to opportunities to build on the solid relationships already established between
those offices and their customers."
"Looking ahead, we expect our margin will stay near the 3.40% that it's at
today for the rest of year, which is less than where we originally hoped it
would be," continued Mr. Small. "However, our earning assets are higher than we
projected them to be, both because of the
acquisition and because of greater than budgeted growth in commercial loans and
in non-residential real estate loans. We expect that gains from the sale of
mortgage loans will continue to be strong in the third quarter, though probably
not at the levels they were in the just-completed quarter and we also expect
that increases in other non-interest income will continue. On the expense side,
our operating costs will increase due to the acquisition but if mortgage rates
stabilize as expected, amortization of mortgage servicing rights will decline."
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m.
(EST) on Tuesday, July 22, 2003 to discuss the earnings results and business
trends. The conference call may be accessed by calling 888-880-1525. The
passcode for the conference call is "First Defiance." The conference
identification number for the call is 1528378. Participants should be prepared
to provide both the passcode and conference identification number to access the
call.
Internet access to the call is also available (in listen-only mode) at the
following Web address:
http://www.firstcallevents.com/service/ajwz383904312gf12.html.
The audio replay of the Internet Web cast will be available at www.fdef.com
------------
until August 29, 2003.
About First Defiance Financial Corp.
First Defiance Financial Corp., headquartered in Defiance, OH, is the
holding company for First Federal Bank of the Midwest and First Insurance and
Investments. First Federal operates 17 full service branches, one commercial
loan production office and 23 ATM locations in northwest Ohio. First Insurance
and Investments is the largest property and casualty insurance company in the
Defiance, OH area and it also specializes in life and group health insurance.
For more information, visit the company's Web site at www.fdef.com.
-------------
-Financial Statements and Highlights Follow-
Safe Harbor Statement
Statements contained herein, including management's expectations, and Mr.
Small's comments, may not be based on historical facts and are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21B of the Securities Act of 1934, as amended. Actual
results could vary materially depending on risks and uncertainties 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. The Company assumes no responsibility to update this
information. For more details, please refer to the Company's SEC filings,
including its most recent Annual Report on Form 10-K and quarterly reports on
Form 10-Q.
- -------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
First Defiance Financial Corp.
June 30, December 31, June 30,
(in thousands) 2003 2002 2002
- -------------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions $ 26,367 $ 17,263 $ 19,210
Interest-bearing deposits 46,220 11,395 62,335
----------- ----------- -----------
72,587 28,658 81,545
Securities
Available-for sale, carried at fair value 177,028 209,604 217,506
Held-to-maturity, carried at amortized costs 3,280 3,921 4,624
----------- ----------- -----------
180,308 213,525 222,130
Loans held for sale 9,731 15,336 610
Loans 698,484 568,537 521,916
Allowance for loan losses (8,105) (7,496) (7,028)
----------- ----------- -----------
Loans, net 700,110 576,377 515,498
Mortgage servicing rights 1,861 2,090 2,211
Accrued interest receivable 4,834 4,533 5,115
Federal Home Loan Bank stock and other interest-bearing assets 17,414 18,302 21,716
Bank Owned Life Insurance 15,549 15,144 --
Office properties and equipment 22,670 19,958 20,228
Real estate and other assets held for sale 63 206 335
Goodwill 20,412 3,636 3,569
Deferred taxes -- -- --
Other assets 12,806 1,816 2,198
Assets held for sale -- -- 5,834
Assets of discontinued operations -- -- --
----------- ----------- -----------
Total Assets $ 1,048,614 $ 884,245 $ 880,379
=========== =========== ===========
Liabilities and Stockholders' Equity
Non-interest-bearing deposits $ 51,798 $ 43,936 $ 32,388
Interest-bearing deposits 699,907 555,637 569,608
----------- ----------- -----------
Total deposits 751,705 599,573 601,996
Advances from Federal Home Loan Bank 154,408 149,096 131,192
Notes payable and other interest-bearing liabilities 8,785 4,308 2,414
Advance payments by borrowers for tax and insurance 218 316 2,305
Deferred taxes 1,961 2,299 606
Other liabilities 9,952 8,543 13,791
Liabilities associated with assets held for sale -- -- 5,887
Liabilities of discontinued operations -- -- --
----------- ----------- -----------
Total liabilities 927,029 764,135 758,191
Stockholders' Equity
Preferred stock -- -- --
Common stock 63 64 68
Additional paid-in-capital 50,026 50,702 53,590
Stock acquired by ESOP (2,068) (2,387) (2,494)
Deferred compensation (20) (30) (56)
Accumulated other comprehensive income 6,695 6,455 3,174
Retained earnings 66,889 65,306 67,906
----------- ----------- -----------
Total stockholders' equity 121,585 120,110 122,188
----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,048,614 $ 884,245 $ 880,379
=========== =========== ===========
- -------------------------------------------------------------------------------------------------------------------
Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
Three Months Ended Six Months Ended
June 30 June 30
(in thousands, except per share amounts) 2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------------------
Interest Income:
Loans $ 9,974 $ 9,081 19,312 18,041
Investment securities 2,108 2,424 4,532 3,175
Interest-bearing deposits 80 409 109 427
-------- -------- ------ ------
Total interest income 12,162 11,914 23,953 21,643
Interest Expense:
Deposits 3,412 4,461 6,946 8,389
FHLB advances and other 1,895 1,690 3,709 1,774
Notes Payable 13 38 22 227
-------- -------- ------ ------
Total interest expense 5,320 6,189 10,677 10,390
-------- -------- ------ ------
Net interest income 6,842 5,725 13,276 11,253
Provision for loan losses 353 156 688 738
-------- -------- ------ ------
Net interest income after provision for loan losses 6,489 5,569 12,588 10,515
Non-interest Income:
Service fees and other charges 1,133 955 2,149 1,753
Dividends on stock and other interest income 172 285 341 466
Gain on sale of loans 2,515 549 4,316 1,075
Gain (loss) on sale of securities 288 -- 919 (15)
Insurance commissions 967 827 1,893 1,710
Trust income 38 24 70 54
Income from Bank Owned Life Insurance 204 -- 405 --
Other non-interest income 20 97 35 119
-------- -------- ------ ------
Total Non-interest Income 5,337 2,737 10,128 5,162
Non-interest Expense:
Compensation and benefits 3,976 3,494 7,684 6,798
Occupancy 741 722 1,469 1,413
SAIF deposit insurance premiums 31 33 55 65
State franchise tax 285 351 566 645
Data processing 427 465 859 691
Amortization of mortgage servicing rights 756 137 1,279 265
Net impairment of mortgage servicing rights 366 168 606 264
Amortization of goodwill and other intangibles 8 -- 8 200
Other non-interest expense 1,111 943 2,189 1,964
-------- -------- ------ ------
Total Non-interest Expense 7,701 6,313 14,715 12,305
-------- -------- ------ ------
Income before income taxes 4,125 1,993 8,001 3,372
Income taxes 1,246 607 2,403 1,099
-------- -------- ------ ------
Income from continuing operations 2,879 1,386 5,598 2,273
Discontinued operations, net of tax -- 7,332 -- 9,347
-------- -------- ------ ------
Income before cumulative effect of a change in
accounting principle 2,879 8,718 5,598 11,620
-------- -------- ------ ------
Cumulative effect in method of accounting for goodwill -- -- -- (194)
Net income $ 2,879 $ 8,718 $ 5,598 $ 11,426
======== ======== ====== ======
Earnings per share:
Basic:
From continuing operations $ 0.48 $ 0.22 $ 0.93 $ 0.35
Discontinued operations, net of tax -- 1.14 -- 1.46
Cumulative effect in method of accounting for goodwill -- -- -- (0.03)
Net income 0.48 1.36 0.93 1.78
Diluted:
From continuing operations $ 0.46 $ 0.21 $ 0.89 $ 0.34
Discontinued operations, net of tax -- 1.09 -- 1.40
Cumulative effect in method of accounting for goodwill -- -- -- (0.03)
Net income 0.46 1.30 0.89 1.71
Average Shares Outstanding
Basic 6,013 6,418 6,044 6,426
Diluted 6,254 6,689 6,293 6,672
- ------------------------------------------------------------------------------------------------------------------------------
Financial Summary and Comparison
First Defiance Financial Corp.
Three months ended Six months ended
June 30, June 30, June 30,
(in thousands, except per share data) 2003 2002 % change 2003 2002 % change
- ------------------------------------------------------------------------------------------------------------------------------
Summary of Operations
Tax-equivalent interest income (1) $ 12,394 $ 12,097 2.5 24,413 21,921 11.4
Interest expense 5,320 6,189 (14.0) 10,677 10,390 2.8
Tax-equivalent net interest income (1) 7,247 5,908 22.7 14,077 11,997 17.3
Provision for loan losses 353 156 126.3 688 738 (6.8)
Tax-equivalent NII after provision for loan loss (1) 6,894 5,752 19.9 13,389 11,259 18.9
Securities gains (losses) 288 - NM 919 (15) NM
Non-interest income-excluding securities gains ( losses) 5,049 2,737 84.5 9,209 5,177 77.9
Non-interest expense 7,701 6,313 22.0 14,715 12,305 19.6
Income taxes 1,246 607 105.3 2,403 1,099 118.7
Income from continuing operations 2,880 1,386 107.8 5,598 2,273 146.3
Tax equivalent adjustment (1) 233 183 27.3 460 278 65.5
- ------------------------------------------------------------------------------------------------------------------------------
At Period End
Assets $ 1,048,614 $ 880,379 19.1
Total assets excluding those of discontinued
operations 1,048,614 880,379 19.1
Earning assets 944,052 821,679 14.9
Loans 708,215 522,526 35.5
Allowance for loan losses 8,105 7,028 15.3
Deposits 751,705 601,996 24.9
Stockholders' equity 121,585 122,188 (0.5)
- ------------------------------------------------------------------------------------------------------------------------------
Average Balances
Assets $ 939,077 $ 885,136 6.1 911,807 1,017,612 (10.4)
Total assets excluding those of discontinued
operations 939,077 885,136 6.1 911,807 782,680 16.5
Earning assets 865,144 830,516 4.2 843,226 705,301 19.6
Deposits and interest-bearing liabilities 808,433 741,922 9.0 780,934 647,842 20.5
Loans 633,755 511,238 24.0 611,796 503,955 21.4
Deposits 649,550 608,020 6.8 621,706 566,327 9.8
Stockholders' equity 120,888 119,166 1.4 120,566 115,626 4.3
Stockholders' equity / assets of continuing operations 12.87% 13.46% (4.4) 13.22% 14.77% (10.5)
- ------------------------------------------------------------------------------------------------------------------------------
Per Common Share Data
Income from continuing operations
Basic $ 0.48 $ 0.22 118.2 $ 0.93 $ 0.35 165.7
Diluted 0.46 0.21 119.0 0.89 0.34 161.8
Dividends 0.15 0.13 15.4 0.30 0.26 15.4
Market Value:
High $ 20.55 $ 21.44 (4.2) $ 20.55$ 21.44 (4.2)
Low 18.56 16.97 9.4 18.43 15.12 21.9
Close 19.84 20.05 (1.0) 19.84 20.05 (1.0)
Book Value 19.36 17.94 7.9 19.36 17.94 7.9
Tangible Book Value 16.11 17.42 (7.5) 16.11 17.42 (7.5)
Shares outstanding, end of period (000) 6,281 6,810 (7.8) 6,281 6,810 (7.8)
- ------------------------------------------------------------------------------------------------------------------------------
Performance Ratios (annualized-continuing operations only)
Tax-equivalent net interest margin (1) 3.36% 2.99% 12.4 3.37% 3.43% (1.7)
Return on average assets (2) 1.23 0.63 95.9 0.61 0.58 5.2
Return on average equity 9.53 4.65 104.8 4.64 3.93 18.1
Efficiency ratio (3) 62.63 74.60 (16.0) 63.20 74.89 (15.6)
Effective tax rate 30.20 30.46 (0.8) 30.03 32.59 (7.8)
Dividend payout ratio (basic) 31.25 59.09 (47.1) 32.26 74.29 (56.6)
- ------------------------------------------------------------------------------------------------------------------------------
(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) Income from continuing operations divided by assets, excluding those
of discontinue operations.
(3) Efficiency ratio = Non-interest expense divided by sum of
tax-equivalent net interest income plus non-interest income, excluding
securities gains, net and asset sales gains, net.
NM Percentage change not meaningful
- -------------------------------------------------------------------------------------------------------------------------------
Continuing Operations Yield Analysis
First Defiance Financial Corp.
Three Months Ended June 30
---------------------------------------------------------------------------------
2003 2002
------------------------------------ --------------------------------------
Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
------- ----------- ------- ------- ----------- -------
Interest-earning assets:
Loans receivable $633,755 $10,030 6.35% $511,238 $ 9,140 7.17%
Securities 189,448 2,284 4.84 188,361 2,548 5.43
Interest Bearing Deposits 24,697 80 1.30 96,337 409 1.70
FHLB stock and other 17,244 172 4.02 34,580 285 3.31
-------- ------- ---- -------- -------- ----
Total interest-earning assets 865,144 12,566 5.83 830,516 12,382 5.98
Non-interest-earning assets (including
assets of discontinued operations) 73,933 54,620
-------- -------
Total assets $939,077 $885,136
======== ========
Deposits and Interest-
bearing liabilities:
Interest bearing deposits $603,045 $ 3,412 2.27% $574,461 $ 4,461 3.11%
FHLB advances and other 154,658 1,895 4.91 131,472 1,690 5.16
Warehouse and term notes payable 4,225 13 1.23 2,430 38 6.27
-------- ------- -------- --------
Total interest-bearing liabilities 761,928 5,320 2.80 708,363 6,189 3.50
Non-interest bearing deposits 46,505 -- -- 33,559 -- --
-------- ------- ---- -------- -------- ----
Total including non-interest-
bearing demand deposits 808,433 5,320 2.64 741,922 6,189 3.35
Other non-interest-bearing liabilities 9,756 24,048
-------- -------
(including liabilities of
discontinued operations )
Total liabilities 818,189 765,970
Stockholders' equity 120,888 119,166
-------- --------
Total liabilities and stock-
holders' equity $939,077 $885,136
======== ========
Net interest income; interest
rate spread $7,246 3.03% $6,193 2.48%
====== ==== ====== ====
Net interest margin (3) 3.36% 2.99%
==== ====
Average interest-earning assets to average
Interest-bearing liabilities 114% 117%
=== ===
(1) Interest on certain tax exempt loans and securities is not taxable for
Federal income tax purposes. In order to compare the tax-exempt yields on
these assets to taxable yields, the interest earned on these assets is
adjusted to a pre-tax equivalent amount based on the marginal corporate
federal income tax rate of 35%.
(2) Annualized
(3) Net interest margin is net interest income divided by average
interest-earning assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Continuing Operations Yield Analysis (Continued)
First Defiance Financial Corp.
Six Months Ended June 30
-----------------------------------------------------------------------------------
2003 2002
------------------------------------------ -----------------------------------
Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
------- ----------- ------- ------- ----------- -------
Interest-earning assets:
Loans receivable $ 611,796 $ 19,428 6.40% $ 503,955 $18,143 7.26%
Securities 198,046 4,875 4.96 120,930 3,350 5.59
Interest Bearing Deposits 15,782 109 1.39 54,972 427 1.57
FHLB stock and other 17,602 341 3.92 25,444 466 3.70
---------- -------- ---- ---------- -------
Total interest-earning assets 843,226 24,753 5.92 705,301 22,386 6.40
Non-interest-earning assets (including
assets of discontinued operations) 68,581 312,311
---------- ----------
Total assets $ 911,807 $1,017,612
========== ==========
Deposits and Interest-
bearing liabilities (4):
Interest bearing deposits $ 579,285 $ 6,946 2.42% $ 535,478 $ 8,389 3.16%
FHLB advances and other 155,610 3,709 4.81 69,585 1,774 5.14
Warehouse and term notes payable 3,618 22 1.23 11,930 227 3.84
---------- -------- ---- ---------- -------
Total interest-bearing liabilities 738,513 10,677 2.92 616,993 10,390 3.40
Non-interest bearing deposits 42,421 -- -- 30,849 -- --
---------- -------- ---- ---------- ------- ----
Total including non-interest-
bearing demand deposits 780,934 10,677 2.76 647,842 10,390 3.23
Other non-interest-bearing liabilities 10,307 254,144
---------- ----------
(including liabilities of
discontinued operations )
Total liabilities 791,241 901,994
Stockholders' equity 120,566 115,626
---------- ----------
Total liabilities and stock-
holders' equity $ 911,807 $1,017,612
========== ==========
Net interest income; interest
rate spread $ 14,076 3.00% $11,996 3.00%
========== ==== ======= ====
Net interest margin (3) 3.37% 3.43%
==== ====
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%.
(2) Annualized
(3) Net interest margin is net interest income divided by average
interest-earning assets.
(4) This analysis does not reflect borrowings to fund discontinued operations.
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Quarterly Information
First Defiance Financial Corp.
(in thousands, except per share data) 2nd Qtr 2003 1st Qtr 2003 4th Qtr 2002 3rd Qtr 2002 2nd Qtr 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of Operations
Tax-equivalent interest income (1) $ 12,394 $ 12,018 $ 12,518 $ 12,405 $ 12,097
Interest expense 5,320 5,357 5,701 5,952 6,189
Tax-equivalent net interest income (1) 7,074 6,661 6,817 6,453 5,908
Provision for loan losses 353 335 328 386 156
Tax-equivalent NII after provision for loan losses (1) 6,721 6,326 6,489 6,067 5,752
Investment securities gains/(losses) 288 631 -- 36 --
Non-interest income (excluding securities gains/losses) 5,049 4,160 4,518 3,235 2,737
Non-interest expense 7,701 7,015 6,702 7,184 6,313
Income taxes 1,246 1,157 1,319 568 607
Income from continuing operations 2,880 2,718 2,765 1,382 1,386
Discontinued operations, net of tax -- -- (494) -- 7,332
Income before effect of a change in accounting principle -- -- 2,271 -- 8,718
Cumulative effect in method of accounting for goodwill -- -- -- -- --
Net income 2,880 2,718 2,271 1,382 8,718
Tax equivalent adjustment (1) 233 227 221 204 183
- ------------------------------------------------------------------------------------------------------------------------------------
At Period End
Total assets $ 1,048,614 $ 896,576 $ 884,245 $ 863,749 $ 880,379
Total assets excluding those of discontinued operations 1,048,614 896,576 884,245 863,749 880,379
Earning assets 944,052 821,678 819,599 809,061 821,679
Loans 708,215 594,431 583,873 553,465 522,526
Allowance for loan losses 8,105 7,924 7,496 7,256 7,028
Deposits 751,705 607,966 599,573 590,792 601,996
Stockholders' equity 121,585 120,147 120,110 124,888 112,118
Stockholders' equity / assets of continuing operations 11.59% 13.40% 13.58% 14.46% 12.74%
Goodwill 20,412 3,658 3,636 3,602 3,569
- ------------------------------------------------------------------------------------------------------------------------------------
Average Balances (2)
Total assets $ 939,077 $ 884,538 $ 877,940 $ 872,808 $ 885,136
Total assets excluding those of discontinued operations 939,077 884,538 877,940 872,808 885,136
Earning assets 865,144 821,307 818,903 815,924 830,516
Deposits and interest-bearing liabilities 808,433 715,095 743,588 696,039 741,922
Loans 633,755 589,837 560,363 535,149 511,238
Deposits 649,550 593,863 596,053 593,780 608,020
Stockholders' equity 120,888 120,253 121,519 123,491 119,166
Stockholders' equity / assets of continuing operations 12.87% 13.60% 13.84% 14.15% 13.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Per Common Share Data
Basic:
From continuing operations$ 0.48 $ 0.45 $ 0.45 $ 0.22 $ 0.22
Discontinued operations, net of tax -- -- (0.08) -- 1.14
Cumulative effect in method of accounting for goodwill -- -- -- -- --
Net income 0.48 0.45 0.37 0.22 1.36
Diluted:
From continuing operations$ $ 0.46 $ 0.43 $ 0.43 $ 0.21 $ 0.21
Discontinued operations, net of tax -- -- (0.08) -- 1.09
Cumulative effect in method of accounting for goodwill -- -- -- -- --
Net income 0.46 0.43 0.35 0.21 1.30
Dividends 0.15 0.15 0.15 0.13 0.13
Market Value:
High $ 20.55 $ 20.67 $ 19.70 $ 21.13 $ 21.44
Low 18.56 18.21 15.78 16.96 16.97
Close 19.84 18.55 18.90 17.17 20.05
Book Value 19.36 18.93 18.73 18.54 17.94
Shares outstanding, end of period (000) 6,281 6,347 6,412 6,737 6,810
- ------------------------------------------------------------------------------------------------------------------------------------
Performance Ratios (annualized- continuing operations only)
Tax-equivalent net interest margin 3.36% 3.37% 3.40% 3.25% 3.06%
Return on average assets (3) 1.23 1.23 1.26 0.63 0.63
Return on average equity 9.53 9.04 9.10 4.48 4.65
Efficiency ratio(4) 62.63 64.84 59.12 73.88 73.02
Effective tax rate 30.20 29.86 32.30 29.13 30.46
Dividend payout ratio (basic) 31.25 33.33 33.33 59.09 59.09
- ------------------------------------------------------------------------------------------------------------------------------------
(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) Average balances do not reflect borrowings to fund discontinued operations
(3) Income from continuing operations divided by assets, excluding assets of
discontinued operations
(4) Efficiency ratio = Non-interest expense divided by sum of tax-equivalent
net interest income plus non-interest income, excluding securities gains,
net and asset sales gains, net.
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Quarterly Information
First Defiance Financial Corp.
(in thousands, except per share data) 2nd Qtr 2003 1st Qtr 2003 4th Qtr 2002 3rd Qtr 2002 2nd Qtr 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Portfolio Composition
One to four family residential real estate $167,412 $149,717 $157,691 $165,113 $165,072
Construction 15,559 13,342 15,357 11,646 8,977
Commercial real estate 307,871 252,939 227,754 202,069 191,471
Commercial 124,332 106,650 104,070 96,537 80,844
Consumer finance 42,189 35,938 37,579 38,725 39,279
Home equity and improvement 59,450 53,860 49,889 46,577 43,990
-------- -------- -------- -------- --------
Total loans 716,813 612,446 592,340 560,648 529,633
Less:
Loans in process 7,431 5,407 7,255 6,049 6,028
Deferred loan origination fees 1,167 1,217 1,212 1,134 1,079
Allowance for loan loss 8,105 7,924 7,496 7,256 7,028
-------- -------- -------- -------- --------
Net Loans $700,110 $597,898 $576,377 $546,209 $515,498
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan loss activity
Beginning allowance $ 7,924 $ 7,496 $ 7,256 $ 7,028 $ 6,933
Provision for loan losses 353 335 328 386 156
Credit loss charge-offs:
One to four family residential real estate 18 - 28 18 15
Commercial real estate 162 - - 110 20
Commercial 38 25 16 20 -
Consumer finance 38 50 86 64 93
Home equity and improvement - - - - -
-------- -------- -------- -------- --------
Total charge-offs 257 75 130 212 128
Total recoveries 85 168 42 54 67
-------- -------- -------- -------- --------
Net charge-offs/(recoveries) 172 (93) 88 158 61
-------- -------- -------- -------- --------
Ending allowance $ 8,105 $ 7,924 $ 7,496 $ 7,256 $ 7,028
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Quality
Non-accrual loans $ 3,273 $ 2,756 $ 2,525 $ 3,287 $ 3,052
Loans over 90 days past due and still accruing - - - - -
-------- -------- -------- -------- --------
Total non-performing loans (1) 3,273 2,756 2,525 3,287 3,052
Real estate owned (REO) 63 59 206 371 335
-------- -------- -------- -------- --------
Total non-performing assets (1) 3,336 2,815 2,731 3,658 3,387
======== ======== ======== ======== ========
Net charge-offs 172 (93) 88 158 61
Allowance for loan losses / loans 1.16% 1.34% 1.32% 1.33% 1.35%
Allowance for loan losses / non-performing assets 242.96 281.49 274.48 198.36 207.50
Allowance for loan losses / non-performing loans 247.63 287.52 296.87 220.75 230.28
Non-performing assets / loans plus REO 0.48 0.48 0.48 0.67 0.65
Non-performing assets / total assets of continuing operations 0.32 0.31 0.31 0.42 0.38
Net charge-offs / average loans ( annualized) 0.11 (0.06) 0.06 0.12 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
Deposit Balances
Non-interest-bearing demand deposits $ 51,798 $ 47,673 $ 43,936 $ 34,542 $ 32,388
Interest-bearing demand deposits and money market 212,123 172,740 170,354 165,405 165,606
Savings deposits 51,693 41,375 39,363 39,569 39,766
Time deposits less than $100,000 341,880 264,938 282,464 276,296 291,438
Time deposits greater than $100,000 94,211 81,240 63,456 74,980 72,798
-------- -------- -------- -------- --------
Total deposits $751,705 $607,966 $599,573 $590,792 $601,996
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Non-performing loans consist of non-accrual loans that are contractually
past due 90 days or more and loans that are deemed impaired under the
criteria of FASB Statement No. 114. Non-performing assets are
non-performing loans plus real estate and other assets acquired by
foreclosure or deed-in-lieu thereof.