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 Net income of $3.1 million or $0.49 per share for 2004 second quarter
compared to $2.9 million or $0.46 for the second quarter of 2003.
o Net interest income increased to $8.1 million for the 2004 second
quarter, an 18.8% increase over prior year second quarter.
o Net interest margin improves to 3.56% for the 2004 second quarter
period from 3.36% in the 2003 second quarter; down one basis point
from 3.57% in the 2004 first quarter.
o Asset quality remains good, net charge-offs in quarter just $120,000
or 0.06% of average loans (annualized). Year-to-date charge-offs just
$176,000 or 0.05% of average loans (annualized).
o Mortgage Servicing Rights Impairment Reserves reduced by $524,000 in
2004 second quarter due to increased long-term interest rates and
slower mortgage prepayment speeds.
DEFIANCE, OHIO (July 19, 2004) - First Defiance Financial Corp. (NASDAQ:
FDEF) today announced net income of $3.1 million or $0.49 per diluted share for
the quarter ended June 30, 2004 compared to $2.9 million or $0.46 per diluted
share for the quarter ended June 30, 2003. For the six-month period ended June
30, 2004, First Defiance had net income of $5.6 million or $0.88 per diluted
share compared to the same period in 2003 where First Defiance earned $5.6
million, or $0.89 per diluted share
Increased Net Interest Income Replaces Gains from Mortgage Sales
First Defiance's net income increased for the 2004 second quarter over
the same period in 2003 despite a $1.7 million decline in gains from mortgage
loan sales, which were just $804,000 in the 2004 second quarter period compared
with $2.5 million during the three months ended June 30, 2003. The reduction in
gains was largely offset by an increase in net interest income, which was $8.1
million in the 2004 second quarter; a $1.3 million or 18.8% increase from the
$6.8 million reported for the 2003 second quarter. The increase in net interest
income for the 2004 second quarter is the result of First Defiance completing
the acquisition of three banking
center offices in Findlay, Ottawa and McComb, Ohio, on June 6, 2003. Through
that acquisition, the Company acquired $79.1 million in loans and $166.7 million
in deposits. First Defiance had the benefit of those balances for just 24 days
in the 2003 second quarter.
"We continue to have very strong loan growth, particularly in the
commercial and commercial real estate categories," said William J. Small, First
Defiance Chairman, President and Chief Executive Officer. "Our average loan
balances have increased by $36.7 million in the last quarter compared to the
2004 first quarter and by $152.8 million over the 2003 second quarter. While
obviously a large part of the increase in average balances was due to the June
2003 banking center acquisition, we also experienced significant organic growth
over the last 12 months. Because of this growth, our interest income from loans
increased in the second quarter over last year by $1.25 million or 12.5% despite
yields on those loans declining by 58 basis points between those same periods.
This level of loan growth is consistent with our projections for the year and
has been a key in our ability to replace the non-recurring gain on sale income
we realized in 2003."
"This organic growth is occurring throughout our branch network," continued
Mr. Small. "It's most pronounced in the Toledo, Bowling Green and Findlay, Ohio
markets, which is to be expected as those are our largest market areas. However
we also have been successful in growing our business in our other communities as
well. We haven't bought this growth by offering low rates, we've generated it
the old fashioned way: by working hard and providing great service. Our
customers want to deal with local bankers who they know and trust; they want
quick answers and friendly, professional service; and they want fair pricing.
With our community banking strategy and customer-first culture, we deliver on
all three counts."
"We expect that we will continue to experience strong loan growth
throughout the rest of 2004," added Mr. Small. "The northwest Ohio economy has
strengthened and our lenders are very busy. I am confident that we will meet or
exceed our projection of 16% loan growth for the year."
While First Defiance's tax equivalent interest income increased by $789,000
from the 2003 second quarter to the 2004 second quarter, interest expense
decreased between those same periods by $439,000 despite a $84.2 million
increase in the average balance of interest-bearing deposits during the 2004
second quarter compared to the same period in 2003. First Defiance's interest
bearing deposits for the 2004 second quarter cost 1.80%, a 47 basis point
decline from the 2003 period. Overall the cost of all interest-bearing
liabilities was 2.28% during the 2004 second quarter, down 52 basis points from
the 2.80% average cost in the 2003 second quarter.
Credit Quality Ratios Remain Excellent
First Defiance's non-performing assets totaled just $3.1 million at June
30, 2004, a slight increase from the $2.9 million level at December 31, 2003 and
the $2.7 million level at March 31, 2004. The ratio of non-performing assets to
total assets was just 0.28% at June 30, 2004, the same level as December 31,
2003 and up only slightly from March 2004's 0.26% level. At June 30, 2004 the
allowance for loan losses to non-performing assets was 312.1%, an increase from
December 31, 2003 when that ratio was 299.90%.
"Our credit quality ratios remain among the best of any bank or thrift of
the same size and lending profile," commented Mr. Small. "Although total loans
have grown almost $115 million in the past 12 months, our non-performing loans
over that same 12-month period are actually down slightly. Our continued success
in this area is due to adherence to our underwriting guidelines, the diversity
of credits in our portfolio, our strategy to lend only in our immediate market
area to customers we know, and active involvement by our board and senior
management in the credit decision process."
Net charge-offs for the second quarter of 2004 totaled $120,000, which is
0.06% of average loans outstanding, annualized for a 12-month period.
Year-to-date charge-offs have totaled $176,000, which is just 0.05% of loans
outstanding annualized. First Defiance's provision for loan losses for the three
months ended June 30, 2004 was $490,000, an increase from $353,000 for the
second quarter of 2003. The increase in the provision is a reflection of the
significant loan growth that has occurred during the 2004 second quarter period,
especially in the commercial and non-residential real estate categories.
Non-Interest Income Declines 22.6% Due to Lower Mortgage Gains
Non-interest income for the three months ended June 30, 2004 declined to
$4.1 million from $5.3 million because of the $1.7 million decrease in gains
from the sale of mortgage loans. Income from those gains has dropped to a more
traditional level in the wake of increases in long-term interest rates over the
past nine months and the resulting decline in mortgage origination volume. First
Defiance realized gains of $804,000 during the 2004 second quarter compared to
$2.5 million in the second quarter of 2003 at the peak of the refinance wave.
Management estimates that such gains will be in the $600,000 to $700,000 range
per quarter for the second half of 2004.
Excluding mortgage gains, non-interest income increased by $505,000 or
17.9% for the 2004 second quarter compared to the same period in 2003. Those
increases were primarily in service fees, which have increased $240,000 or 21.2%
in the 2004 second quarter compared to the same period in 2003 and in insurance
and investment sales commissions, which increased by $256,000 or 26.5% over the
previous year's second quarter. The increase in fees is due both to an increase
in accounts resulting from the June 2003 branch acquisition and an increase in
rates charged for certain services. The increase in insurance and investment
sales commission income is primarily a result of successful efforts in selling
investment products through the Company's First Insurance and Investments
subsidiary.
Non-Interest Expense Up 12.9% Excluding MSR Impairment and Amortization
Overall, First Defiance's reported non-interest expense for the three-month
period ended June 30, 2004 declined by $567,000 when compared with the 2003
second quarter period. However, the 2004 quarterly amount includes the recovery
of $524,000 of previously recorded impairment of mortgage servicing rights
(MSRs). That impairment recovery is the result of a 65 basis point increase in
the 10-year treasury rate over the last quarter. At June 30, 2004, First
Defiance's $443.9 million mortgage servicing portfolio had a recorded value of
$4.2 million or
0.95% of the unpaid principal balance of loans serviced, and remaining
impairment reserves at that date totaled approximately $319,000. First Defiance
recorded impairment reserve expense of $366,000 in the second quarter of 2003.
In addition, non-interest expense for the 2004 second quarter included $233,000
in amortization of MSRs, a decrease from $756,000 recognized in the second
quarter of 2003. The decline in MSR amortization is a direct result of the lower
level of mortgage refinance activity in the 2004 second quarter compared to the
prior year.
Excluding mortgage servicing impairment and amortization activity,
non-interest expenses increased to $7.4 million in the 2004 second quarter from
$6.6 million in the 2003 second quarter, an increase of 12.9%. Most of the
increase is due to the recognition of a full quarter of expense in 2004 for the
branches acquired in June of 2003, compared to just three weeks of such expense
in the 2003 second quarter. In addition, de novo branches were opened on the
east side of Findlay, Ohio in December 2003 and in the Toledo, Ohio suburb of
Maumee in February 2004.
Year-to-Date Results
First Defiance's results for the six months ended June 30, 2004 reflect an
increase in net interest income to $16.1 million from $13.3 million for the same
period in 2003. That 21.6% increase is the result of both the increased volume
of interest-earning assets, due both to the June 2003 acquisition and the
significant organic loan growth over the last 12 months, and improved net
interest margin, which was 3.57% for the six-month period, up from 3.37% in the
first half of 2003.
Provision for loan losses increased in the first half of 2004, to $868,000
from $688,000 in the first half of 2003, as a result of the significant loan
growth during the last twelve months. The loan loss reserve at June 30, 2004 was
$9.5 million compared to $8.1 million at June 30, 2003 and $8.8 million at
December 31, 2003.
Non-interest income declined significantly to $7.6 million for the first
half of 2004 from $10.1 million for the first half of 2003, a decline of $2.6
million, which relates entirely to the $2.9 million decline in mortgage loan
gains in 2004 compared to 2003. Excluding mortgage activity, non-interest income
for the first half of 2004 increased to $6.2 million from $5.8 million in the
first half of 2003 as service fees increased by 20.0% and insurance and
investment commissions increased by 20.8%.
Non-interest expense for the six months ended June 30, 2004 were $14.6
million compared to $14.7 million for the same period of 2003. However MSR
impairment and amortization activity was a net $119,000 for the first half of
2004 compared to nearly $1.9 million for the first half of 2003. Excluding
mortgage activity, non-interest expense increased to $14.5 million in the first
six months of 2004 from $12.8 million in the same period of 2003, an increase of
12.9%. That increase is the result of the 2003 branch acquisition as well as the
establishment of de novo branches in December 2003 and February 2004.
Total Assets at $1.07 Billion
First Defiance's total assets totaled $1.07 billion at June 30, 2004, up
from $1.04 billion at December 31, 2003. Net loans and total deposits increased
to $813.2 million and $753.4 million respectively at June 30, 2004, up from
$741.1 million and $729.0 million at December 31, 2003.
Shareholders' equity totaled $124.5 million at June 30, 2004, up just
slightly from the $124.3 million level at December 31, 2003. Total shareholders'
equity balances have not changed despite year-to-date net income of $5.6 million
because of the declaration of dividends totaling $2.5 million, the purchase of
122,848 shares of First Defiance stock at a total cost of $3.08 million (average
cost of $25.08 per share), and a reduction in accumulated other comprehensive
income of $2.2 million relating to the after-tax change in unrealized gains in
the available-for-sale investment portfolio. The equity balances also were
favorably impacted by the exercise of 112,801 stock options through the first
six months, which increased equity by $1.3 million.
Guidance Update
Management reiterated that guidance provided with the first quarter
earnings release which projected earnings per share for 2004 in the $1.80 to
$1.90 range remains current. Management estimates that net income per share for
the 2004 third quarter will be between $0.45 and $0.49.
"Our guidance of $1.80 to $1.90 per share for the year remains accurate,"
commented Mr. Small. "In the update, we have reduced some of the growth we
initially forecast in the core deposit balance accounts by $5 million for the
year, which has a slight negative impact on our margin; and we've projected
further 0.25% increases in the Fed Funds rate to occur in September and
November, which will be generally beneficial for First Defiance. We have not
anticipated any further adjustments to reduce or increase MSR impairment
reserves but we have included in the forecast $150,000 of securities gains that
we've already realized in July. We believe that our margin on a tax-equivalent
basis will increase to the 3.60% to 3.65% range in the third quarter and will
exceed 3.65% in the fourth quarter."
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m.
(EDT) on Tuesday, July 20, 2004 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 8506941. 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/ajwz407849424gf12.html.
The audio replay of the Internet Web cast will be available at www.fdef.com
until August 31, 2004.
About 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 and
Investments. First Federal operates 19 full service branches and 25 ATM
locations in northwest Ohio. First Insurance and Investments is the largest
property and casualty insurance agency in the Defiance, Ohio area and it also
specializes in life and group health insurance and financial planning.
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.
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Consolidated Balance Sheets
First Defiance Financial Corp.
June 30, December 31, June 30,
(in thousands) 2004 2003 2003
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Assets
Cash and cash equivalents
Cash and amounts due from depository institutions $ 19,414 $ 28,020 $ 26,367
Interest-bearing deposits 1,125 9,763 46,220
----------- ----------- -----------
20,539 37,783 72,587
Securities
Available-for sale, carried at fair value 150,869 168,259 177,028
Held-to-maturity, carried at amortized costs 2,582 2,776 3,280
----------- ----------- -----------
153,451 171,035 180,308
Loans held for sale 3,948 5,872 9,731
Loans 818,769 744,099 698,484
Allowance for loan losses (9,537) (8,844) (8,105)
----------- ----------- -----------
Loans, net 813,180 741,127 700,110
Mortgage servicing rights 3,783 3,431 1,861
Accrued interest receivable 4,725 4,742 4,834
Federal Home Loan Bank stock and other interest-bearing assets 13,095 17,766 17,414
Bank Owned Life Insurance 18,337 17,952 15,549
Office properties and equipment 23,890 23,846 22,670
Real estate and other assets held for sale 206 404 63
Goodwill and other intangibles 19,310 20,544 20,412
Other assets 2,650 1,969 12,806
----------- ----------- -----------
Total Assets $ 1,073,166 $ 1,040,599 $ 1,040,599
=========== =========== ===========
Liabilities and Stockholders' Equity
Non-interest-bearing deposits $ 56,659 $ 52,323 $ 51,798
Interest-bearing deposits 696,731 676,673 699,907
----------- ----------- -----------
Total deposits 753,390 728,996 751,705
Advances from Federal Home Loan Bank 176,623 164,522 154,408
Notes payable and other interest-bearing liabilities 9,360 12,267 8,785
Advance payments by borrowers for tax and insurance 83 231 218
Deferred taxes 950 1,859 1,961
Other liabilities 8,308 8,455 9,952
----------- ----------- -----------
Total liabilities 948,714 916,330 927,029
Stockholders' Equity
Preferred stock -- -- --
Common stock 63 63 63
Additional paid-in-capital 51,760 51,144 50,026
Stock acquired by ESOP (1,585) (1,904) (2,068)
Deferred compensation (7) (11) (20)
Accumulated other comprehensive income 1,865 4,017 6,695
Retained earnings 72,356 70,960 66,889
----------- ----------- -----------
Total stockholders' equity 124,452 124,269 121,585
----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,073,166 $ 1,040,599 $ 1,048,614
=========== =========== ===========
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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) 2004 2003 2004 2003
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Interest Income:
Loans $ 11,279 $ 9,974 $ 22,207 $ 19,312
Investment securities 1,727 2,108 3,592 4,532
Interest-bearing deposits 4 80 36 109
-------- -------- -------- --------
Total interest income 13,010 12,162 25,835 23,953
Interest Expense:
Deposits 3,071 3,412 6,069 6,946
FHLB advances and other 1,790 1,895 3,575 3,709
Notes Payable 20 13 43 22
-------- -------- -------- --------
Total interest expense 4,881 5,320 9,687 10,677
-------- -------- -------- --------
Net interest income 8,129 6,842 16,148 13,276
Provision for loan losses 490 353 868 688
-------- -------- -------- --------
Net interest income after provision for loan losses 7,639 6,489 15,280 12,588
Non-interest Income:
Service fees and other charges 1,373 1,133 2,578 2,149
Dividends on stock and other interest income 153 172 330 341
Gain on sale of loans 804 2,515 1,393 4,316
Gain on sale of securities 293 288 392 919
Insurance and investment sales commissions 1,223 967 2,286 1,893
Trust income 50 38 98 70
Income from Bank Owned Life Insurance 192 204 385 405
Other non-interest income 43 20 92 35
-------- -------- -------- --------
Total Non-interest Income 4,131 5,337 7,554 10,128
Non-interest Expense:
Compensation and benefits 4,473 3,976 8,788 7,684
Occupancy 842 741 1,682 1,469
SAIF deposit insurance premiums (credit) 28 31 (14) 55
State franchise tax 157 285 312 566
Data processing 579 427 1,122 859
Amortization of mortgage servicing rights 233 756 406 1,279
Impairment (recovery) of mortgage servicing rights (524) 366 (287) 606
Amortization of intangibles 27 8 55 8
Other non-interest expense 1,319 1,111 2,536 2,189
-------- -------- -------- --------
Total Non-interest Expense 7,134 7,701 14,600 14,715
-------- -------- -------- --------
Income before income taxes 4,636 4,125 8,234 8,001
Income taxes 1,492 1,246 2,597 2,403
-------- -------- -------- --------
Net income $ 3,144 $ 2,879 $ 5,637 $ 5,598
======== ======== ======== ========
Earnings per share:
Basic $ 0.51 $ 0.48 $ 0.92 $ 0.93
Diluted $ 0.49 $ 0.46 $ 0.88 $ 0.89
Average Shares Outstanding:
Basic 6,125 6,013 6,115 6,044
Diluted 6,385 6,254 6,402 6,293
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Financial Summary and Comparison
First Defiance Financial Corp.
Three months ended Six months ended
June 30, June 30,
-------- --------
(dollars in thousands, except per share data) 2004 2003 % change 2004 2003 % change
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Summary of Operations
Tax-equivalent interest income (1) 13,202 12,394 6.5 26,213 24,413 7.4
Interest expense 4,881 5,320 (8.3) 9,687 10,677 (9.3)
Tax-equivalent net interest income (1) 8,321 7,074 17.6 16,526 13,736 20.3
Provision for loan losses 490 353 38.8 868 688 26.2
Tax-equivalent NII after provision for loan loss (1) 7,831 6,721 16.5 15,658 13,048 20.0
Securities gains (losses) 293 288 1.7 392 919 (57.3)
Non-interest income-excluding securities gains (losses) 3,838 5,049 (24.0) 7,162 9,209 (22.2)
Non-interest expense 7,134 7,701 (7.4) 14,600 14,715 (0.8)
Income taxes 1,492 1,246 19.7 2,597 2,403 8.1
Net Income 3,144 2,879 9.2 5,637 5,598 0.7
Tax equivalent adjustment (1) 192 232 (17.2) 378 460 (17.8)
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At Period End
Assets 1,073,166 939,077 11.9
Earning assets 980,851 865,144 10.6
Loans 822,717 808,433 13.5
Allowance for loan losses 9,537 8,105 17.7
Deposits 753,390 751,705 0.2
Stockholders' equity 124,452 121,585 2.4
Stockholders' equity / assets 11.60% 11.59% 0.1
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Average Balances
Assets 1,050,462 939,077 11.9 1,043,517 911,807 14.4
Earning assets 957,173 865,144 10.6 949,258 843,226 12.6
Deposits and interest-bearing liabilities 917,422 808,433 13.5 908,853 780,934 16.4
Loans 786,575 633,755 24.1 768,211 611,796 25.6
Deposits 742,088 649,550 14.2 734,195 621,706 18.1
Stockholders' equity 125,909 120,888 4.2 125,890 120,566 4.4
Stockholders' equity / assets 11.99% 12.87% (6.9) 12.06% 13.22% (8.8)
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Per Common Share Data
Net Income
Basic $ 0.51 $ 0.48 6.3 $ 0.92 $ 0.93 (1.1)
Diluted 0.49 0.46 6.5 0.88 0.89 (1.1)
Dividends 0.20 0.15 33.3 0.40 0.30 33.3
Market Value:
High $ 28.88 $ 20.55 40.5 $ 29.00 $ 20.55 41.1
Low 22.07 18.56 18.9 22.07 18.43 19.8
Close 22.10 19.84 11.4 22.10 19.84 11.4
Book Value 19.70 19.36 1.8 19.70 19.36 1.8
Tangible Book Value 16.64 16.11 3.3 16.64 16.11 3.3
Shares outstanding, end of period (000) 6,318 6,281 0.6 6,318 6,281 0.6
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Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.56% 3.36% 6.0 3.57% 3.37% 6.1
Return on average assets 1.20% 1.23% (2.4) 1.08% 1.23% (12.0)
Return on average equity 9.99% 9.53% 4.8 8.96% 9.29% (3.6)
Efficiency ratio (2) 58.67% 63.52% (7.6) 61.63% 64.13% (3.9)
Effective tax rate 32.18% 30.20% 6.6 31.54% 30.03% 5.0
Dividend payout ratio (basic) 39.22% 31.25% 25.5 43.48% 32.26% 34.8
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(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 and asset sales gains, net.
NM Percentage change not meaningful
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Yield Analysis
First Defiance Financial Corp.
Three Months Ended June 30
---------------------------------------------------------------------------
2004 2003
---------------------------------- --------------------------------
Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 786,575 $ 11,283 5.77% $ 633,755 $ 10,030 6.35%
Securities 154,995 1,915 4.97% 189,448 2,284 4.84%
Interest Bearing Deposits 347 4 4.64% 24,697 80 1.30%
FHLB stock and other 15,256 153 4.03% 17,244 172 4.00%
----------- --------- --------- --------
Total interest-earning assets 957,173 13,355 5.61% 865,144 12,566 5.83%
Non-interest-earning assets 93,289 73,933
----------- ---------
Total assets $ 1,050,462 $ 939,077
=========== =========
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 687,293 $ 3,071 1.80% $ 603,045 $ 3,412 2.27%
FHLB advances and other 165,668 1,790 4.35% 154,658 1,895 4.91%
Other Borrowings 9,666 20 0.83% 4,225 13 1.23%
----------- --------- --------- --------
Total interest-bearing liabilities 862,627 4,881 2.28% 761,928 5,320 2.80%
Non-interest bearing deposits 54,795 - - 46,505 - -
----------- --------- --------- -------
Total including non-interest-bearing demand deposits 917,422 4,881 2.14% 808,433 5,320 2.64%
Other non-interest-bearing liabilities 7,131 9,756
----------- ---------
Total liabilities 924,553 818,189
Stockholders' equity 125,909 120,888
----------- ---------
Total liabilities and stockholders' equity $ 1,050,462 $ 939,077
=========== --------- ========= --------
Net interest income; interest rate spread $ 8,474 3.33% $ 7,246 3.03%
========= ==== ======== =====
Net interest margin (3) 3.56% 3.36%
==== =====
Average interest-earning assets to average interest 111% 114%
bearing liabilities ==== =====
Six Months Ended June 30
---------------------------------------------------------------------------
2004 2003
---------------------------------- --------------------------------
Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 768,211 $ 22,215 5.82% $ 611,796 $ 19,428 6.40%
Securities 160,117 3,962 4.98% 198,046 4,875 4.96%
Interest Bearing Deposits 4,418 36 1.64% 15,782 109 1.39%
FHLB stock and other 16,512 330 4.02% 17,602 341 3.91%
----------- --------- --------- --------
Total interest-earning assets 949,258 26,543 5.62% 843,226 24,753 5.92%
Non-interest-earning assets 94,259 68,581
----------- ---------
Total assets $ 1,043,517 $ 911,807
=========== =========
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 680,243 $ 6,069 1.79% $ 579,285 $ 6,946 2.42%
FHLB advances and other 164,455 3,575 4.37% 155,610 3,709 4.81%
Other Borrowings 10,203 43 0.85% 3,618 22 1.23%
---------- --------- -------
Total interest-bearing liabilities 854,901 9,687 2.28% 738,513 10,677 2.92%
Non-interest bearing deposits 53,952 - - 42,421 - -
----------- --------- --------- --------
Total including non-interest-bearing demand deposits 908,853 9,687 2.14% 780,934 10,677 2.76%
Other non-interest-bearing liabilities 8,774 10,307
----------- ---------
Total liabilities 917,627 791,241
Stockholders' equity 125,890 120,566
----------- ---------
Total liabilities and stockholders' equity $ 1,043,517 $ 911,807
=========== --------- ========= --------
Net interest income; interest rate spread $ 16,856 3.34% $ 14,076 3.00%
========= ==== ======== =====
Net interest margin (3) 3.57% 3.37%
==== =====
Average interest-earning assets to average interest bearing liabilities 111% 114%
==== =====
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(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.
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Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data) 2nd Qtr 2004 1st Qtr 2004 4th Qtr 2003 3rd Qtr 2003 2nd Qtr 2003
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Summary of Operations
Tax-equivalent interest income (1) $ 13,202 $ 12,988 $ 13,140 $ 13,136 $ 12,394
Interest expense 4,881 4,806 4,980 5,198 5,320
Tax-equivalent net interest income (1) 8,321 8,182 8,160 7,938 7,074
Provision for loan losses 490 379 534 497 353
Tax-equivalent NII after provision for loan losses (1) 7,831 7,803 7,804 7,742 6,721
Investment securities gains 293 98 656 - 288
Non-interest income (excluding securities gains/losses) 3,838 3,324 3,179 4,839 5,049
Non-interest expense 7,134 7,464 6,885 6,776 7,701
Income taxes 1,492 1,105 1,572 1,715 1,246
Net income 3,144 2,493 2,819 3,681 2,880
Tax equivalent adjustment (1) 192 163 185 233 233
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At Period End
Total assets $1,073,166 $1,037,100 $1,040,599 $1,032,942 $1,048,614
Earning assets 980,851 946,949 939,691 925,187 944,052
Loans 822,717 775,301 749,971 730,471 708,215
Allowance for loan losses 9,537 9,167 8,844 8,577 8,105
Deposits 753,390 722,068 728,996 735,407 751,705
Stockholders' equity 124,452 127,230 124,269 123,179 121,585
Stockholders' equity / assets 11.60% 12.27% 11.94% 11.93% 11.59%
Goodwill 19,310 19,302 20,544 20,548 20,412
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Average Balances (2)
Total assets $1,050,462 $1,036,571 $1,038,384 $1,038,188 $ 939,077
Earning assets 957,173 941,345 941,839 945,431 865,144
Deposits and interest-bearing liabilities 917,422 900,285 904,468 855,294 808,433
Loans 786,575 749,848 731,665 713,402 633,755
Deposits 742,088 726,302 735,451 743,293 649,550
Stockholders' equity 125,909 125,872 123,266 120,536 120,888
Stockholders' equity / assets 1 1.99% 12.14% 11.87% 11.61% 12.87%
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Per Common Share Data
Basic earnings per share $ 0.51 $ 0.41 $ 0.47 $ 0.61 $ 0.48
Diluted earnings per share 0.49 0.39 0.44 0.58 0.46
Dividends 0.20 0.20 0.20 0.15 0.15
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Market Value:
High $ 28.88 $ 29.00 $ 30.65 $ 26.64 $ 20.55
Low 22.07 26.60 24.00 19.46 18.56
Close 22.10 27.23 25.90 23.30 19.84
Book Value 19.70 19.88 19.64 19.56 19.36
Shares outstanding, end of period (in thousands) 6,318 6,401 6,328 6,295 6,281
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Performance Ratios (annualized)
Tax-equivalent net interest margin 3.56% 3.57% 3.51% 3.46% 3.36%
Return on average assets (3) 1.20% 0.96% 1.09% 1.41% 1.23%
Return on average equity 9.99% 7.92% 9.15% 12.14% 9.53%
Efficiency ratio (4) 58.67% 64.87% 60.72% 53.03% 63.52%
Effective tax rate 32.18% 30.71% 35.80% 31.78% 30.20%
Dividend payout ratio (basic) 39.22% 49.04% 42.55% 24.46% 31.25%
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(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.
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Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data) 2nd Qtr 2004 1st Qtr 2004 4th Qtr 2003 3rd Qtr 2003 2nd Qtr 2003
- -----------------------------------------------------------------------------------------------------------------------------
Loan Portfolio Composition
One to four family residential real estate $181,685 $173,367 $167,983 $165,914 $167,412
Construction 15,472 15,272 16,830 16,457 15,559
Commercial real estate 371,360 359,070 341,423 321,602 307,871
Commercial 140,178 119,442 120,677 130,001 124,332
Consumer finance 42,741 40,858 40,257 40,532 42,189
Home equity and improvement 80,312 74,800 70,038 63,853 59,450
-------- -------- -------- -------- --------
Total loans 831,748 782,809 757,208 738,359 716,813
Less:
Loans in process 7,925 6,406 6,079 6,713 7,431
Deferred loan origination fees 1,106 1,101 1,158 1,175 1,167
Allowance for loan loss 9,537 9,167 8,844 8,577 8,105
-------- -------- -------- -------- --------
Net Loans $813,180 $766,135 $741,127 $721,894 $700,110
======== ======== ======== ======== ========
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Allowance for loan loss activity
Beginning allowance $ 9,167 $ 8,844 $ 8,577 $ 8,106 $ 7,924
Provision for loan losses 490 379 534 497 353
Credit loss charge-offs:
One to four family residential real estate -- 52 -- -- 18
Commercial real estate 9 -- -- -- 162
Commercial 125 14 260 52 38
Consumer finance 33 38 37 45 38
Home equity and improvement -- -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs 167 104 297 97 256
Total recoveries 47 48 30 71 85
-------- -------- -------- -------- --------
Net charge-offs (recoveries) 120 56 267 26 171
-------- -------- -------- -------- --------
Ending allowance $ 9,537 $ 9,167 $ 8,844 $ 8,577 $ 8,106
======== ======== ======== ======== ========
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Credit Quality
Non-accrual loans $ 2,863 $ 2,375 $ 2,545 $ 2,975 $ 3,273
Loans over 90 days past due and still accruing -- -- -- -- --
Total non-performing loans (1) 2,863 2,375 2,545 2,975 3,273
Real estate owned (REO) 193 348 404 324 63
Total non-performing assets (1) $ 3,056 $ 2,723 $ 2,949 $ 3,299 $ 3,336
Net charge-offs 120 56 267 26 171
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Allowance for loan losses / loans 1.16% 1.18% 1.18% 1.17% 1.14%
Allowance for loan losses / non-performing assets 312.07% 336.65% 299.90% 259.99% 242.96%
Allowance for loan losses / non-performing loans 333.11% 385.98% 347.50% 288.30% 247.63%
Non-performing assets / loans plus REO 0.37% 0.35% 0.39% 0.45% 0.47%
Non-performing assets / total assets 0.28% 0.26% 0.28% 0.32% 0.32%
Net charge-offs / average loans ( annualized) 0.06% 0.03% 0.15% 0.01% 0.11%
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Deposit Balances
Non-interest-bearing demand deposits $ 56,659 $ 52,091 $ 52,323 $ 52,190 $ 51,798
Interest-bearing demand deposits and money market 225,842 216,193 216,042 215,641 212,123
Savings deposits 53,965 54,054 51,767 51,532 51,693
Time deposits less than $100,000 303,909 293,424 312,089 324,262 341,880
Time deposits greater than $100,000 113,015 106,306 96,775 91,782 94,211
-------- -------- -------- -------- --------
Total deposits $753,390 $722,068 $728,996 $735,407 $751,705
======== ======== ======== ======== ========
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(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.