Contact: William J. Small
Chairman, President and CEO
First Defiance Financial Corp.
(419) 782-5015
bsmall@first-fed.com
--------------------
FIRST DEFIANCE ANNOUNCES THIRD QUARTER 2004
EARNINGS
HIGHLIGHTS
o Net income of $1.7 million or $0.26 per share for 2004 third quarter
compared to $3.7 million or $0.58 for the third quarter of 2003.
o 2004 third quarter includes $1.9 million charge ($1.25 million or
$0.20 per share after tax) to settle contingent liability associated
with former subsidiary. Excluding this item, earnings for the quarter
would have been $2.9 million or $0.46 per share.
o 2004 third quarter results also include mortgage servicing impairment
charge of $321,000 ($209,000 or $0.03 per share after tax).
Comparative 2003 quarter included $987,000 ($642,000 or $0.10 per
share after tax) of impairment recovery.
o Net interest income increased to $8.6 million for the 2004 third
quarter, a 9.6% increase over prior year third quarter.
o Net interest margin improved to 3.58% for the 2004 third quarter from
3.46% in the 2003 third quarter; up two basis points from 3.56% in the
2004 second quarter.
o Asset quality remains good, net charge-offs in quarter just $201,000
or 0.10% of average loans (annualized). Year-to-date charge-offs just
$377,000 or 0.06% of average loans (annualized).
o Year-to-date net income of $7.3 million or $1.15 per share for first
nine months of 2004 compared to $9.3 million or $1.47 per share in
same period of 2003. Excluding settlement of contingent liability,
2004 year-to-date net income would have been $8.6 million or $1.35 per
share.
DEFIANCE, OHIO (October 18, 2004) - First Defiance Financial Corp. (NASDAQ:
FDEF) today announced net income of $1.7 million or $0.26 per diluted share for
the quarter ended September 30, 2004 compared to $3.7 million or $0.58 per
diluted share for the quarter ended September 30, 2003. For the nine-month
period ended September 30, 2004, First Defiance had net income of $7.3 million,
or $1.15 per diluted share compared to the same period in 2003 when First
Defiance earned $9.3 million, or $1.47 per diluted share.
Earnings Impacted by Settlement of Contingent Liability
Income for the 2004 third quarter was negatively impacted by the previously
announced $1.9 million charge recorded during the quarter to settle certain
contingent liabilities related to the 2002 sale of its Leader Mortgage Company
subsidiary. After tax, the charge amounts to $1.25 million or $0.20 per share.
"We are pleased to have reached a settlement in this matter," said William
J. Small, First Defiance Chairman, President and Chief Executive Officer. "I
want to stress that this in no way relates to any of our existing operations and
will not have any impact on our operating results going forward. We previously
recognized an after-tax gain from the sale of Leader Mortgage of $7.7 million or
$1.16 per share so even with the recognition of this item, we are still
satisfied with that transaction."
Mortgage Servicing Impairment Impacts Quarterly Comparison
First Defiance results for the 2004 third quarter, when compared with the
same period of 2003, were also significantly impacted by impairment of mortgage
servicing rights (MSRs). During the quarter ended September 30, 2004, First
Defiance recorded a pre-tax charge for MSR impairment of $321,000 compared with
the recognition of a recovery of $987,000 of previously recorded MSR impairment
reserves during the quarter ended September 30, 2003. The quarter-over-quarter
fluctuation in that item was more than $1.3 million before tax and approximately
$850,000 or $0.13 per share after tax. At September 30, 2004, First Defiance
serviced $455.9 million in loans for others. The MSRs for those loans had a fair
value of $3.7 million or 0.80% of the outstanding balance serviced. Total
impairment reserves (which are available for recapture in the future) totaled
$640,000 at September 30, 2004.
"The volatility of the 10-year Treasury over the past 12 months has caused
the value of our mortgage servicing to fluctuate significantly from
quarter-to-quarter," said Mr. Small. "In 2004 alone, we've gone from recording
$237,000 of impairment in the first quarter, to recovering $524,000 in the
second quarter, to recording $321,000 of impairment in the third quarter. When
the yield on the 10-year Treasury recovers, which it will eventually, we'll
likely recapture a portion of those reserves again."
Growth in Net Interest Income Partially Offsets Reduction in Gain on Sale Income
Gains from the sale of mortgage loans declined to $518,000 for the three
months ended September 30, 2004 compared to $2.3 million for the same period in
2003, a reduction of nearly $1.8 million. The 2003 third quarter was the last in
a series of four consecutive quarters where First Defiance recorded more than
$1.8 million in mortgage gain on sale income, the result of a mortgage refinance
boom driven by historically low interest rates. Management believes the levels
of the recent quarters are indicative of more normal mortgage production levels.
The reduction in mortgage gains was partially
offset by a 9.6% increase in net interest income and by $302,000 in gains from
sales in the investment portfolio recorded in the 2004 third quarter.
Net interest income for the 2004 third quarter increased to $8.6 million
from $7.8 million for the same period in 2003. The increase was the result of an
improved net interest margin, which was 3.58% for the 2004 third quarter
compared to 3.46% in the 2003 third quarter, a $48 million increase in the
average balance of interest-earning assets, and an improved mix between loans
receivable and investment securities. The average balance of loans receivable
increased to $832.1 million for the three-month period ended September 30, 2004
compared to $713.4 million for the same quarter in 2003. Most of the growth has
been in commercial real estate loans, where balances have increased from $341.4
million at the end of 2003 to $392.6 million at September 30, 2004; commercial
loans, where balances have increased from $120.7 million at December 31, 2003 to
$141.3 million at September 30, 2004 and home equity loans, where balances have
increased from $70.0 million at December 31, 2003 to $87.8 million at September
30, 2004. The growth in loans has been partially funded by securities maturing,
being called or being sold out of the investment portfolio. The balance of
investment securities has declined from $171.0 million at December 31, 2003 to
$144.1 million at September 30, 2004.
"We realized some benefit from the recent Federal Reserve rate hikes in our
net interest margin," said Mr. Small. "The margin came in right about where we
expected based on our forecast. Our loan growth continues to be strong and we
expect that we will continue to benefit as rates rise through the end of the
year."
Credit Quality Ratios Remain Outstanding
"We also continue to be very pleased with our credit quality," said Mr.
Small. "Our non-performing assets declined to just over $2.0 million as of
September 30, 2004, a reduction of more than $1.0 million from the previous
quarter. These figures are at their lowest level since the end of the 2001
second quarter. That is especially impressive when you consider that our
outstanding loan balances have increased by more than $330 million during that
time frame. At September 30, 2004 our non-performing assets were just 0.18% of
our total assets and our allowance for loan losses to non-performing loans was
499.3%."
First Defiance's provision for the 2004 third quarter was $376,000 compared
to $497,000 for the same period in 2003. The allowance for loan losses at
September 30, 2004 stood at $9.7 million, up from $8.8 million at December 31,
2003 and $8.6 million at September 30, 2003.
Fee Income Up Slightly, Expenses (excluding contingent settlement, MSRs) Down
Slightly
For the 2004 third quarter, non-interest income decreased to $3.6 million
from $4.8 million for the same period in 2003 with the decline a result of the
nearly $1.8
million drop in gains from sales of mortgage loans. Excluding gains from the
sale of loans and investment securities, non-interest income increased to $2.7
million from $2.6 million with most of the increase in service fees and other
charges.
For those same periods, total non-interest expense increased to $9.5
million for the 2004 third quarter compared to $6.8 million for the same period
in 2003. However, excluding the contingent settlement and the impact of MSR
impairment and amortization, non-interest expense between the two periods
actually declined slightly, to $7.1 million from $7.2 million.
Year-to-Date Income Declines Due to Contingent Settlement, Mortgage Gains
For the nine-month period ended September 30, 2004, net income totaled $7.2
million, a 22% decline from the 2003 nine-month total of $9.3 million.
Approximately $1.25 million of the decline is the after-tax impact of the
resolution of the contingent liability relating to the Leader Mortgage sale,
while the balance of the decline is due to a $4.7 million decline in mortgage
gains on sale for 2004 compared to 2003. That decline was partially offset by a
$3.6 million increase in net interest income in 2004 compared to 2003. The
comparison of the year-to-date results are somewhat skewed by the fact that the
2003 results included the impact of three branches that were acquired at the end
of June 2003, contributing to 2003 operations for just three months, while they
have been included for the full nine months of 2004.
Total Assets Exceed $1.1 Billion
Total assets were $1.102 billion at September 30, 2004, up from $1.04
billion at December 31, 2003. Net loans and total deposits increased to $851.4
million and $779.3 million respectively, at September 30, 2004, up from $741.1
million and $729.0 million at December 31, 2003.
Shareholders' equity totaled $125.4 million at September 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 $7.2 million
because of the declaration of dividends totaling $3.8 million, the purchase of
158,905 shares of First Defiance stock at a total cost of $4.0 million (average
cost of $25.30 per share), and a reduction in accumulated other comprehensive
income of $1.1 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 105,601 stock options through the first
nine months, which increased equity by $1.2 million.
Two Acquisitions Announced
On August 4, 2004, First Defiance entered into an agreement to acquire
ComBanc, Inc. and its wholly owned subsidiary The Commercial Bank, both
headquartered in Delphos, Ohio. The Commercial Bank has four banking offices in
Allen County, Ohio: one in Delphos, two in Lima and one in Elida. Combined,
those offices
had $175 million in deposits and $120 million in loans as of June 30, 2004. The
purchase price of ComBanc is valued at $38.0 million based on the August 4, 2004
First Defiance stock price with ComBanc shareholders having the right to select
payment of the purchase price in either cash or shares of First Defiance common
stock, subject to an aggregate consideration mix of 50% cash and 50% common
stock. First Defiance expects the transaction to be accretive to earnings by
$0.03 to $0.05 per share in 2005 with no repurchase assumptions or revenue
synergies assumed. Annual pre-tax expense reductions are estimated to be
approximately $1.4 million with approximately 75% of those to be realized in the
first year. It is estimated that one-time costs, including acquisition-related
and restructuring charges, will not exceed $1.75 million on a pre-tax basis over
the integration period.
On October 13, 2004, First Defiance entered into an agreement to acquire
The Genoa Savings and Loan Company (Genoa Savings), which has four locations in
the greater Toledo, Ohio market area including banking offices in Genoa, Oregon,
Maumee and Perrysburg, Ohio. Combined, the banking offices had $84 million in
deposits and $72 million in loans at June 30, 2004. The purchase price of Genoa
Savings is $11.0 million and will be paid in cash. First Defiance expects the
transaction to be accretive to earnings by $0.01 to $0.03 per share in 2005 with
no revenue synergies assumed. Annual pre-tax expense reductions are estimated to
be approximately $1.7 million with approximately 75% to be realized in the first
12 months. It is estimated that one-time costs, including acquisition related
and restructuring charges, will not exceed $2.35 million on a pre-tax basis over
the integration period.
"Both of these acquisitions are consistent with our announced strategy to
grow in existing and adjacent markets," said Mr. Small. "We are very excited
about the opportunities that the deals bring us. The markets are healthy and
present good opportunities to continue growing both deposits and loans. Our
First Federal Bank brand is known in the area and we believe that our reputation
for customer service combined with our local decision-making strategy will
benefit individual and business customers at these new additions to our branch
network. We look forward to working with the staffs, customers and shareholders
of both Commercial Bank and Genoa Savings for successful transitions."
Management anticipates closing the ComBanc transaction in late January 2005
while the expected closing of the Genoa Savings transaction is in late March
2005. "We realize it's a challenge to integrate both the ComBanc and Genoa
Savings branches into our network and culture within a short period of time,"
said Mr. Small. "But it's one I know we'll be able to handle based on the
experience and expertise of our retail, operations, human resources and training
teams."
Upon completion of the two transactions, on a pro forma basis using June
30, 2004 data, First Defiance will have $1.37 billion in assets and $1.01
billion in total deposits.
Guidance Update
Management reiterated that guidance provided with earlier earnings releases
which projected earnings per share for 2004 in the $1.80 to $1.90 range has been
lowered to the $1.60 to $1.65 range for the full year in 2004 to reflect the
settlement of the contingent liability. Management estimates that net income per
share for the 2004 fourth quarter will be between $0.47 and $0.52, excluding any
potential impairment recapture.
"Looking ahead to 2005, I believe we are well positioned for earnings
growth," stated Mr. Small. "Our strong growth in commercial loans and
non-residential real-estate loans will allow us to benefit when market rates
rise as expected. The economic outlook for northwest Ohio continues to improve
and we are very excited about the opportunities we have for revenue enhancements
in the new markets we're entering. As noted, we are anticipating those
acquisitions to be accretive by $0.04 to $0.08 per share combined in 2005. Those
estimates do not take into account any revenue growth or income enhancements
beyond planned cost savings. We think that our approach to community banking and
our focus on sales and profitability in the markets will provide us with many
additional opportunities to grow revenue and increase profitability beyond what
we have included in our estimates.
"Our challenge in the coming year will be to grow our low-cost deposits,
especially commercial and retail checking account balances," said Mr. Small.
"There is no question that we can continue to successfully grow our loans and
our track record on credit quality has been very good. But to exceed our
profitability goals in 2005 we will need to focus on growing those low-cost
deposit balances."
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m.
(EDT) on Tuesday, October 19, 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 1267378. 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://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=90296&eventID=950445.
The audio replay of the Internet Web cast will be available at www.fdef.com
until November 30, 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 &
Investments. First Federal operates 19 full service branches and 25 ATM
locations in northwest Ohio. First Insurance & 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.
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: the future recapture of mortgage servicing
impairment reserves, future movements of interest rates and particularly 10-year
Treasury notes, the production levels of mortgage loan generation, the ability
to continue to grow loans and deposits, the ability to benefit from a rising
interest rate environment, the ability to sustain credit quality ratios at
current or improved levels, a secondary market for packaged mortgage loan
securities, future repurchases of First Defiance Financial Corp. stock and the
positive impact of exercised stock options on shareholders' equity, the ability
to gain regulatory, shareholder and other required approvals to close the
announced acquisitions, ability to achieve expected earnings, expense reductions
and levels of one-time costs including acquisition-related and restructuring
charges, ability to successfully integrate the acquired banking offices into the
First Federal Bank of the Midwest branch network by the specified times, the
level of assets and total loans expected upon completion of the announced
acquisitions, 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, 2003. 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.
- --------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
First Defiance Financial Corp.
September 30, December 31, September 30,
(in thousands) 2004 2003 2003
- --------------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions $ 20,557 $ 28,020 $ 20,153
Interest-bearing deposits 627 9,763 25,322
----------- ----------- -----------
21,184 37,783 45,475
Securities
Available-for sale, carried at fair value 141,655 168,259 175,018
Held-to-maturity, carried at amortized costs 2,427 2,776 2,953
----------- ----------- -----------
144,082 171,035 177,971
Loans held for sale 6,812 5,872 11,594
Loans 854,258 744,099 718,877
Allowance for loan losses (9,712) (8,844) (8,577)
----------- ----------- -----------
Loans, net 851,358 741,127 721,894
Mortgage servicing rights 3,516 3,431 3,041
Accrued interest receivable 5,155 4,742 5,038
Federal Home Loan Bank stock and other interest-bearing assets 13,235 17,766 17,589
Bank Owned Life Insurance 18,532 17,952 15,760
Office properties and equipment 24,056 23,846 23,104
Real estate and other assets held for sale 61 404 324
Goodwill and other intangibles 18,961 20,544 20,548
Other assets 2,243 1,969 2,198
----------- ----------- -----------
Total Assets $ 1,102,383 $ 1,040,599 $ 1,032,942
=========== =========== ===========
Liabilities and Stockholders' Equity
Non-interest-bearing deposits $ 55,321 $ 52,323 $ 52,190
Interest-bearing deposits 723,935 676,673 683,217
----------- ----------- -----------
Total deposits 779,256 728,996 735,407
Advances from Federal Home Loan Bank 173,670 164,522 153,967
Notes payable and other interest-bearing liabilities 12,052 12,267 9,726
Advance payments by borrowers for tax and insurance 179 231 153
Deferred taxes 1,074 1,859 1,957
Other liabilities 10,716 8,455 8,553
----------- ----------- -----------
Total liabilities 976,947 916,330 909,763
Stockholders' Equity
Preferred stock -- -- --
Common stock 63 63 63
Additional paid-in-capital 51,593 51,144 50,367
Stock acquired by ESOP (1,478) (1,904) (1,962)
Deferred compensation (6) (11) (16)
Accumulated other comprehensive income 2,963 4,017 5,322
Retained earnings 72,301 70,960 69,405
----------- ----------- -----------
Total stockholders' equity 125,436 124,269 123,179
----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,102,383 $ 1,040,599 $ 1,032,942
=========== =========== ===========
Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(in thousands, except per share amounts) 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------------
Interest Income:
Loans $ 12,205 $ 10,934 $ 34,412 $ 30,246
Investment securities 1,633 1,987 5,225 6,519
Interest-bearing deposits 1 107 37 216
-------- -------- -------- --------
Total interest income 13,839 13,028 39,674 36,981
Interest Expense:
Deposits 3,384 3,330 9,453 10,275
FHLB advances and other 1,843 1,843 5,418 5,553
Notes Payable 31 25 75 47
-------- -------- -------- --------
Total interest expense 5,258 5,198 14,946 15,875
-------- -------- -------- --------
Net interest income 8,581 7,830 24,728 21,106
Provision for loan losses 376 497 1,244 1,185
-------- -------- -------- --------
Net interest income after provision for loan losses 8,205 7,333 23,484 19,921
Non-interest Income:
Service fees and other charges 1,372 1,204 3,950 3,353
Dividends on stock and other interest income 140 176 471 518
Gain on sale of loans 518 2,274 1,910 6,590
Gain on sale of securities 302 -- 694 919
Insurance and investment sales commissions 906 924 3,192 2,817
Trust income 69 46 167 116
Income from Bank Owned Life Insurance 194 211 579 616
Other non-interest income 49 4 140 23
-------- -------- -------- --------
Total Non-interest Income 3,550 4,839 11,103 14,952
Non-interest Expense:
Compensation and benefits 4,274 4,281 13,062 11,965
Occupancy 798 758 2,452 2,227
SAIF deposit insurance premiums 26 30 12 85
State franchise tax 155 272 467 838
Data processing 595 498 1,717 1,357
Amortization of mortgage servicing rights 141 546 547 1,825
Impairment (recovery) of mortgage servicing rights 321 (987) 34 (381)
Amortization of intangibles 28 31 82 39
Settlement of contingent liability 1,927 -- 1,927 --
Other non-interest expense 1,204 1,347 3,767 3,537
-------- -------- -------- --------
Total Non-interest Expense 9,469 6,776 24,067 21,492
-------- -------- -------- --------
Income before income taxes 2,286 5,396 10,520 13,381
Income taxes 606 1,715 3,203 4,118
-------- -------- -------- --------
Net income $ 1,680 $ 3,681 $ 7,317 $ 9,263
======== ======== ======== ========
Earnings per share:
Basic $ 0.28 $ 0.61 $ 1.20 $ 1.54
Diluted $ 0.26 $ 0.58 $ 1.15 $ 1.47
Average Shares Outstanding:
Basic 6,084 6,002 6,106 6,033
Diluted 6,340 6,293 6,383 6,296
- ------------------------------------------------------------------------------------------------------------------------------
Financial Summary and Comparison
First Defiance Financial Corp.
Three months ended Nine months ended
September 30, September 30,
------------- -------------
(dollars in thousands, except per share data) 2004 2003 % change 2004 2003 % change
- ------------------------------------------------------------------------------------------------------------------------------
Summary of Operations
Tax-equivalent interest income (1) 14,049 13,136 7.0 40,262 37,674 6.9
Interest expense 5,258 5,198 1.2 14,946 15,875 (5.9)
Tax-equivalent net interest income (1) 8,791 7,938 10.7 25,316 21,799 16.1
Provision for loan losses 376 497 (24.3) 1,244 1,185 5.0
Tax-equivalent NII after provision for loan loss (1) 8,415 7,441 13.1 24,072 20,614 16.8
Securities gains 302 - #DIV/0! 694 919 (24.5)
Non-interest income-excluding securities gains 3,248 4,839 (32.9) 10,409 14,033 (25.8)
Non-interest expense 9,469 6,776 39.7 24,067 21,492 12.0
Income taxes 606 1,715 (64.7) 3,203 4,118 (22.2)
Net Income 1,680 3,681 (54.4) 7,317 9,263 (21.0)
Tax equivalent adjustment (1) 210 108 94.4 588 693 (15.2)
- ------------------------------------------------------------------------------------------------------------------------------
At Period End
Assets 1,102,383 1,032,942 6.7
Earning assets 1,009,302 942,776 7.1
Loans 861,070 730,471 17.9
Allowance for loan losses 9,712 8,577 13.2
Deposits 779,256 735,407 6.0
Stockholders' equity 125,436 123,179 1.8
Stockholders' equity / assets 11.38% 11.93% (4.6)
- ------------------------------------------------------------------------------------------------------------------------------
Average Balances
Assets 1,087,205 1,038,188 4.7 1,058,079 953,934 10.9
Earning assets 993,406 945,431 5.1 963,837 877,295 9.9
Deposits and interest-bearing liabilities 951,392 907,307 4.9 923,033 823,059 12.1
Loans 832,116 713,402 16.6 789,513 645,665 22.3
Deposits 768,455 743,293 3.4 745,615 662,236 12.6
Stockholders' equity 125,800 120,536 4.4 125,860 120,556 4.4
Stockholders' equity / assets 11.57% 11.61% (0.3) 11.90% 12.64% (5.9)
- ------------------------------------------------------------------------------------------------------------------------------
Per Common Share Data
Net Income
Basic $ 0.28 $ 0.61 (54.3) $ 1.20 $ 1.54 (21.8)
Diluted 0.26 0.58 (55.6) 1.15 1.47 (21.8)
Dividends 0.20 0.15 33.3 0.60 0.45 33.3
Market Value:
High $ 26.73 $ 26.64 0.3 $ 29.00 $ 26.64 8.9
Low 22.01 19.46 13.1 22.01 18.43 19.4
Close 26.01 23.30 11.6 26.01 23.30 11.6
Book Value 19.94 19.56 1.9 19.94 19.56 1.9
Tangible Book Value 16.92 16.30 3.8 16.92 16.30 3.8
Shares outstanding, end of period (000) 6,286 6,295 (0.1) 6,286 6,295 (0.1)
- ------------------------------------------------------------------------------------------------------------------------------
Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.58% 3.46% 3.4 3.57% 3.40% 5.1
Return on average assets 0.62% 1.42% (56.4) 0.92% 1.29% (28.8)
Return on average equity 5.34% 12.22% (56.3) 7.75% 10.24% (24.3)
Efficiency ratio (2) 78.65% 53.03% 48.3 67.37% 59.98% 12.3
Effective tax rate 26.51% 31.78% (16.6) 30.45% 30.77% (1.1)
Dividend payout ratio (basic) 71.43% 24.46% 192.0 50.00% 29.31% 70.6
- ------------------------------------------------------------------------------------------------------------------------------
(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) 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
- ------------------------------------------------------------------------------------------------------------------------------------
Yield Analysis
First Defiance Financial Corp.
Three Months Ended September 30
----------------------------------------------------------------------------
2004 2003
----------------------------------- -----------------------------------
Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 832,116 $ 12,209 5.84% $ 713,402 $ 10,989 6.11%
Securities 147,358 1,839 4.96% 177,730 2,165 4.83%
Interest Bearing Deposits 835 1 0.48% 36,884 107 1.15%
FHLB stock and other 13,097 140 4.25% 17,415 176 4.01%
----------- ----------- ----------- ----------
Total interest-earning assets 993,406 14,189 5.68% 945,431 13,437 5.64%
Non-interest-earning assets 93,799 92,757
----------- -----------
Total assets $ 1,087,205 $ 1,038,188
=========== ===========
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 712,814 $ 3,384 1.89% $ 691,280 $ 3,330 1.91%
FHLB advances and other 172,620 1,843 4.25% 154,116 1,843 4.74%
Other Borrowings 10,317 31 1.20% 9,898 25 1.00%
----------- ----------- ----------- ---------
Total interest-bearing liabilities 895,751 5,258 2.34% 855,294 5,198 2.41%
Non-interest bearing deposits 55,641 - - 52,013 - -
----------- ----------- ----------- ---------
Total including non-interest-bearing demand 951,392 5,258 2.20% 907,307 5,198 2.27%
Other non-interest-bearing liabilities 10,013 10,345
----------- -----------
Total liabilities 961,405 917,652
Stockholders' equity 125,800 120,536
----------- -----------
Total liabilities and stockholders' equity $ 1,087,205 $ 1,038,188
=========== ----------- =========== ---------
Net interest income; interest rate spread $ 8,931 3.34% $ 8,239 3.23%
=========== ======= ========= ======
Net interest margin (3) 3.58% 3.46%
======= ======
Average interest-earning assets to average interest bearing liabilities 111% 111%
======= ======
Nine Months Ended September 30
---------------------------------------------------------------------------
2004 2003
----------------------------------- -----------------------------------
Average Yield Average Yield
Balance Interest(1 Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 789,513 $ 34,424 5.82% $ 645,665 $ 30,418 6.30%
Securities 155,864 5,801 4.97% 191,274 7,040 4.92%
Interest Bearing Deposits 3,086 37 1.60% 22,816 216 1.27%
FHLB stock and other 15,374 471 4.09% 17,540 518 3.95%
----------- -------- --------- --------
Total interest-earning assets 963,837 40,733 5.65% 877,295 38,192 5.82%
Non-interest-earning assets 94,242 76,639
----------- ---------
Total assets $ 1,058,079 $ 953,934
=========== =========
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 691,100 $ 9,453 1.83% $ 616,617 $ 10,275 2.23%
FHLB advances and other 167,177 5,418 4.33% 155,112 5,553 4.79%
Other Borrowings 10,241 75 0.98% 5,711 47 1.10%
----------- -------- --------- --------
Total interest-bearing liabilities 868,518 14,946 2.30% 777,440 15,875 2.73%
Non-interest bearing deposits 54,515 - - 45,619 - -
----------- -------- --------- --------
Total including non-interest-bearing demand deposit 923,033 14,946 2.16% 823,059 15,875 2.58%
Other non-interest-bearing liabilities 9,186 10,319
----------- ---------
Total liabilities 932,219 833,378
Stockholders' equity 125,860 120,556
----------- ---------
Total liabilities and stockholders' equity $ 1,058,079 $ 953,934
=========== -------- ========= --------
Net interest income; interest rate spread $ 25,787 3.35% $ 22,317 3.09%
======== ==== ======== ======
Net interest margin (3) 3.57% 3.40%
==== ======
Average interest-earning assets to average i nterest bearing liabilities 111% 113%
==== ======
- ------------------------------------------------------------------------------------------------------------------------------------
(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.
- ----------------------------------------------------------------------------------------------------------------------------------
Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data) 3rd Qtr 2004 2nd Qtr 2004 1st Qtr 2004 4th Qtr 2003 3rd Qtr 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Summary of Operations
Tax-equivalent interest income (1) $ 14,049 $ 13,202 $ 12,988 $ 13,140 $ 13,136
Interest expense 5,258 4,881 4,806 4,980 5,198
Tax-equivalent net interest income (1) 8,791 8,321 8,182 8,160 7,938
Provision for loan losses 376 490 379 534 497
Tax-equivalent NII after provision for loan losses (1) 8,415 7,831 7,803 7,804 7,441
Investment securities gains 302 293 98 656 --
Non-interest income (excluding securities gains/losses) 3,248 3,838 3,324 3,179 4,839
Non-interest expense 9,469 7,134 7,464 6,885 6,776
Income taxes 606 1,492 1,105 1,572 1,715
Net income 1,680 3,144 2,493 2,819 3,681
Tax equivalent adjustment (1) 210 192 163 185 108
- ----------------------------------------------------------------------------------------------------------------------------------
At Period End
Total assets $ 1,102,383 $ 1,073,166 $ 1,037,100 $ 1,040,599 $ 1,032,942
Earning assets 1,009,302 980,851 946,949 939,691 942,776
Loans 861,070 822,717 775,301 749,971 730,471
Allowance for loan losses 9,712 9,537 9,167 8,844 8,577
Deposits 779,256 753,390 722,068 728,996 735,407
Stockholders' equity 125,436 124,452 127,230 124,269 123,179
Stockholders' equity / assets 11.38% 11.60% 12.27% 11.94% 11.93%
Goodwill 18,961 19,310 19,302 20,544 20,548
- ----------------------------------------------------------------------------------------------------------------------------------
Average Balances (2)
Total assets $ 1,087,205 $ 1,050,462 $ 1,036,571 $ 1,038,384 $ 1,038,188
Earning assets 993,406 957,173 941,345 941,839 945,431
Deposits and interest-bearing liabilities 951,392 917,422 900,285 904,468 907,307
Loans 832,116 786,575 749,848 731,665 713,402
Deposits 768,455 742,088 726,302 735,451 743,293
Stockholders' equity 125,800 125,909 125,872 123,266 120,536
Stockholders' equity / assets 11.57% 11.99% 12.14% 11.87% 11.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Per Common Share Data
Basic earnings per share $ 0.28 $ 0.51 $ 0.41 $ 0.47 $ 0.61
Diluted earnings per share 0.26 0.49 0.39 0.44 0.58
Dividends 0.20 0.20 0.20 0.20 0.15
Market Value:
High $ 26.73 $ 28.88 $ 29.00 $ 30.65 $ 26.64
Low 22.01 22.07 26.60 24.00 19.46
Close 26.01 22.10 27.23 25.90 23.30
Book Value 19.94 19.70 19.88 19.64 19.56
Shares outstanding, end of period (in thousands) 6,286 6,318 6,401 6,328 6,295
- ----------------------------------------------------------------------------------------------------------------------------------
Performance Ratios (annualized)
Tax-equivalent net interest margin 3.58% 3.52% 3.57% 3.51% 3.46%
Return on average assets (3) 0.62% 1.20% 0.96% 1.09% 1.42%
Return on average equity 5.34% 9.99% 7.92% 9.15% 12.22%
Efficiency ratio (4) 78.65% 58.67% 64.87% 60.72% 53.03%
Effective tax rate 26.51% 32.18% 30.71% 35.80% 31.78%
Dividend payout ratio (basic) 71.43% 39.22% 49.04% 42.55% 24.46%
- ----------------------------------------------------------------------------------------------------------------------------------
(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.
(dollars in thousands, except per share data) 3rd Qtr 2004 2nd Qtr 2004 1st Qtr 2004 4th Qtr 2003 3rd Qtr 2003
- -----------------------------------------------------------------------------------------------------------------------------
Loan Portfolio Composition
One to four family residential real estate $186,688 $181,685 $173,367 $167,983 $165,914
Construction 16,816 15,472 15,272 16,830 16,457
Commercial real estate 392,610 371,360 359,070 341,423 321,602
Commercial 141,264 140,178 119,442 120,677 130,001
Consumer finance 45,267 42,741 40,858 40,257 40,532
Home equity and improvement 87,755 80,312 74,800 70,038 63,853
-------- -------- -------- -------- --------
Total loans 870,400 831,748 782,809 757,208 738,359
Less:
Loans in process 8,155 7,925 6,406 6,079 6,713
Deferred loan origination fees 1,175 1,106 1,101 1,158 1,175
Allowance for loan loss 9,712 9,537 9,167 8,844 8,577
-------- -------- -------- -------- --------
Net Loans $851,358 $813,180 $766,135 $741,127 $721,894
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------
Allowance for loan loss activity
Beginning allowance $ 9,537 $ 9,167 $ 8,844 $ 8,577 $ 8,106
Provision for loan losses 376 490 379 534 497
Credit loss charge-offs:
One to four family residential real estate -- -- 52 -- --
Commercial real estate 25 9 -- -- --
Commercial 144 125 14 260 52
Consumer finance 78 33 38 37 45
Home equity and improvement -- -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs 247 167 104 297 97
Total recoveries 46 47 48 30 71
-------- -------- -------- -------- --------
Net charge-offs (recoveries) 201 120 56 267 26
-------- -------- -------- -------- --------
Ending allowance $ 9,712 $ 9,537 $ 9,167 $ 8,844 $ 8,577
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------
Credit Quality
Non-accrual loans $ 1,945 $ 2,863 $ 2,375 $ 2,545 $ 2,975
Loans over 90 days past due and still accruing -- -- -- -- --
-------- -------- -------- -------- --------
Total non-performing loans (1) 1,945 2,863 2,375 2,545 2,975
Real estate owned (REO) 61 193 348 404 324
-------- -------- -------- -------- --------
Total non-performing assets (1) $ 2,006 $ 3,056 $ 2,723 $ 2,949 $ 3,299
======== ======== ======== ======== ========
Net charge-offs 201 120 56 267 26
Allowance for loan losses / loans 1.13% 1.16% 1.18% 1.18% 1.17%
Allowance for loan losses / non-performing assets 484.15% 312.07% 336.65% 299.90% 259.99%
Allowance for loan losses / non-performing loans 499.33% 333.11% 385.98% 347.50% 288.30%
Non-performing assets / loans plus REO 0.23% 0.37% 0.35% 0.39% 0.45%
Non-performing assets / total assets 0.18% 0.28% 0.26% 0.28% 0.32%
Net charge-offs / average loans ( annualized) 0.10% 0.06% 0.03% 0.15% 0.01%
Deposit Balances
Non-interest-bearing demand deposits $ 55,321 $ 56,659 $ 52,091 $ 52,323 $ 52,190
Interest-bearing demand deposits and money market 239,524 225,842 216,193 216,042 215,641
Savings deposits 53,143 53,965 54,054 51,767 51,532
Time deposits less than $100,000 285,939 303,909 293,424 312,089 324,262
Time deposits greater than $100,000 145,329 113,015 106,306 96,775 91,782
-------- -------- -------- -------- --------
Total deposits $779,256 $753,390 $722,068 $728,996 $735,407
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------
(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.