UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarterly Period Ended September 30, 2007

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from ___________to__________

Commission file number 0-26850

                    First Defiance Financial Corp.                   

(Exact name of registrant as specified in its charter)

Ohio	34-1803915
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
601 Clinton Street, Defiance, Ohio	43512
(Address or principal executive office)	(Zip Code)

Registrant's telephone number, including area code:  (419) 782-5015

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ¨ Accelerated filer   ý Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨  No ý

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.01 Par Value – 7,084,319 shares outstanding at November 9, 2007.

FIRST DEFIANCE FINANCIAL CORP.

INDEX

		Page Number
PART I.-FINANCIAL INFORMATION
Item 1.	Consolidated Condensed Financial Statements (Unaudited):
	Consolidated Condensed Statements of Financial
	Condition – September 30, 2007 and December 31, 2006	2
	Consolidated Condensed Statements of Income -
	Three and nine ended September 30, 2007 and 2006	4
	Consolidated Condensed Statement of Changes in Stockholders’
	Equity – Three and nine months ended September 30, 2007
	and 2006	5
	Consolidated Condensed Statements of Cash Flows
	- Nine months ended September 30, 2007 and 2006	6
	Notes to Consolidated Condensed Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial
	Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about
	Market Risk	33
Item 4.	Controls and Procedures	35
PART II-OTHER INFORMATION:
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities
	and Use of Proceeds	36
Item 3.	Defaults upon Senior Securities	36
Item 4.	Submission of Matters to a Vote of Security Holders	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
	Signatures	38

1

PART 1-FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

(Amounts in Thousands)

	September 30, 2007		December 31, 2006
	(In Thousands)
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	30,558	$	47,668
Interest-bearing deposits		29,379		2,355
		59,937		50,023
Securities:
Available-for-sale, carried at fair value		111,236		110,682
Held-to-maturity, carried at amortized cost
(fair value $1,279 and $1,492 at September 30, 2007
and December 31, 2006, respectively)		1,236		1,441
		112,472		112,123
Loans held for sale		7,426		3,426
Loans receivable, net of allowance of $13,427 at September
30, 2007 and $13,579 at December 31, 2006, respectively		1,251,445		1,226,310
Accrued interest receivable		8,102		6,984
Federal Home Loan Bank stock		18,586		18,586
Bank owned life insurance		28,315		25,326
Premises and equipment		38,287		34,899
Real estate and other assets held for sale		3,392		2,392
Goodwill		36,515		35,090
Core deposit and other intangibles		3,717		3,397
Mortgage servicing rights		5,917		5,529
Other assets		5,835		3,794
Total assets	$	1,579,946	$	1,527,879

(continued)

2

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

(Amounts in Thousands)

	September 30, 2007			December 31, 2006
	(In Thousands)
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	1,208,164		$	1,138,445
Advances from the Federal Home Loan Bank		128,461			162,228
Short term borrowings and other interest-bearing liabilities		24,645			30,424
Subordinated debentures		36,083			20,619
Advance payments by borrowers		430			667
Deferred taxes		1,292			1,295
Other liabilities		16,165			14,376
Total liabilities		1,415,240			1,368,054
Stockholders’ equity:
Preferred stock, no par value per share:
5,000 shares authorized; no shares issued		-			-
Common stock, $.01 par value per share:
20,000 shares authorized; 11,703 shares issued
and 7,095 and 7,142 shares outstanding, respectively		117			117
Additional paid-in capital		112,587			110,285
Stock acquired by ESOP		(202	)		(628	)
Accumulated other comprehensive loss, net of
tax of $(376) and $(362), respectively		(699	)		(671	)
Retained earnings		124,899			120,112
Treasury stock, at cost, 4,608 and 4,561 shares respectively		(71,996	)		(69,390	)
Total stockholders’ equity		164,706			159,825
Total liabilities and stockholders’ equity	$	1,579,946		$	1,527,879

See accompanying notes

3

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Income

(UNAUDITED)

(Amounts in Thousands, except per share data)

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2007		2006		2007		2006
Interest Income
Loans	$	22,983	$	22,341	$	67,882	$	63,605
Investment securities:
Taxable		1,129		1,198		3,403		3,387
Non-taxable		310		284		887		853
Interest-bearing deposits		262		7		483		145
FHLB stock dividends		305		262		898		765
Total interest income		24,989		24,092		73,553		68,755
Interest Expense
Deposits		10,536		9,140		30,130		23,835
FHLB advances and other		1,636		2,256		5,253		6,778
Subordinated debentures		597		343		1,518		962
Notes payable		193		144		519		403
Total interest expense		12,962		11,883		37,420		31,978
Net interest income		12,027		12,209		36,133		36,777
Provision for loan losses		671		373		1,704		1,438
Net interest income after provision for loan losses		11,356		11,836		34,429		35,339
Non-interest Income
Service fees and other charges		2,764		2,580		7,997		6,658
Insurance and investment sales commission income		1,180		981		4,244		3,643
Mortgage banking income		921		923		2,780		2,544
Gain on sale of non-mortgage loans		138		63		204		500
Gain on sale of securities		21		-		21		-
Trust income		95		76		280		232
Income from Bank Owned Life Insurance		321		250		929		730
Other non-interest income		144		187		407		395
Total non-interest income		5,584		5,060		16,862		14,702
Non-interest Expense
Compensation and benefits		6,424		6,211		19,610		18,251
Occupancy		1,516		1,278		4,324		3,793
State franchise tax		355		331		1,074		995
Data processing		941		903		2,838		2,760
Amortization of intangibles		167		180		481		539
Other non-interest expense		2,893		2,188		7,623		6,291
Total non-interest expense		12,296		11,091		35,950		32,629
Income before income taxes		4,644		5,805		15,341		17,412
Federal income taxes		1,515		1,982		4,995		5,785
Net Income		3,129		3,823		10,346		11,627
Earnings per share (Note 6)
Basic	$	0.44	$	0.54	$	1.46	$	1.66
Diluted	$	0.44	$	0.53	$	1.44	$	1.62
Dividends declared per share (Note 5)	$	0.25	$	0.24	$	0.75	$	0.72
Average shares outstanding (Note 6)
Basic		7,080		7,032		7,101		7,020
Diluted		7,171		7,146		7,201		7,161

See accompanying notes

4

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statement of Changes in Stockholders’ Equity

(UNAUDITED)

(Amounts in Thousands)

	Three Months Ended						Nine Months Ended
	September 30						September 30,
	2007			2006			2007			2006
Balance at beginning of period	$	164,657		$	154,312		$	159,825		$	151,216
Adjustment to initially apply FIN 48		-			-			(200	)		-
Balance at beginning of period as adjusted		164,657			154,312			159,625			151,216
Comprehensive income:
Net income		3,129			3,823			10,346			11,627
Other comprehensive income (loss)		483			962			(28	)		(45	)
Total comprehensive income		3,612			4,785			10,318			11,582
ESOP shares released		333			324			1,376			1,326
Stock option expense		72			77			202			210
Tax benefit of employee plans		-			409			56			409
Shares issued under stock option plans		-			498			462			2,208
Treasury shares repurchased		(2,216	)		(569	)		(4,271	)		(3,741	)
Acquisition of Huber, Harger, Welt and Smith		-			-			2,250			-
Common cash dividends declared (Note 5)		(1,752	)		(1,681	)		(5,312	)		(5,055	)
Balance at end of period	$	164,706		$	158,155		$	164,706		$	158,155

See Accompanying Notes

5

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(UNAUDITED)

(Amounts in Thousands)

	Nine Months Ended
	September 30,
	2007			2006
Operating Activities
Net cash provided by operating activities	$	9,514		$	16,609
Investing Activities
Proceeds from maturities of held-to-maturity securities		204			185
Proceeds from maturities of available-for-sale securities		17,355			8,542
Proceeds from sale of available-for-sale securities		2,521			-
Proceeds from sale of real estate and other assets held for sale		2,120			1,714
Proceeds from sale of property, plant and equipment		5			222
Net cash received in acquisition of Huber, Harger, Welt and Smith		190			-
Proceeds from sale of non-mortgage loans		11,320			-
Purchases of available-for-sale securities		(20,499	)		(14,061	)
Investment in bank owned life insurance		(2,060	)		-
Purchases of office properties and equipment		(5,664	)		(4,611	)
Net increase in loans receivable		(41,506	)		(64,386	)
Net cash (used in) provided by investing activities		(36,014	)		(72,395	)
Financing Activities
Net increase in deposits and advance payments by borrowers		69,560			61,061
Repayment of Federal Home Loan Bank long-term advances		(653	)		(66,988	)
Net (decrease) increase in Federal Home Loan Bank short-term advances		(33,100	)		17,500
Proceeds from issuance of subordinated debentures		15,464			-
Proceeds from Federal Home Loan Bank long-term advances		-			45,000
Decrease in securities sold under repurchase agreements		(5,779	)		(2,141	)
Purchase of common stock for treasury		(4,271	)		(3,741	)
Cash dividends paid		(5,325	)		(5,036	)
Proceeds from exercise of stock options		462			2,208
Excess tax benefits from exercise of stock options		56			409
Net cash provided by financing activities		36,414			48,272
(Decrease) increase in cash and cash equivalents		9,914			(7,514	)
Cash and cash equivalents at beginning of period		50,023			49,256
Cash and cash equivalents at end of period	$	59,937		$	41,742
Supplemental cash flow information:
Interest paid	$	36,725		$	31,114
Income taxes paid	$	4,520		$	4,664
Transfers from loans to other real estate owned and other
assets held for sale	$	3,510		$	4,336

See accompanying notes.

6

FIRST DEFIANCE FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements

(Unaudited at September 30, 2007 and 2006)

1. Principles of Consolidation

The consolidated condensed financial statements include the accounts of First Defiance Financial Corp. ("First Defiance" or "the Company"), its two wholly owned subsidiaries, First Federal Bank of the Midwest ("First Federal") and First Insurance and Investments, Inc. (“First Insurance”). In the opinion of management, all significant inter-company accounts and transactions have been eliminated in consolidation.

2. Basis of Presentation

The consolidated condensed statement of financial condition at December 31, 2006 has been derived from the audited financial statements at that date, which were included in First Defiance’s Annual Report on Form 10-K.

The accompanying consolidated condensed financial statements as of September 30, 2007 and for the three and nine month period ended September 30, 2007 and 2006 have been prepared by First Defiance without audit and do not include information or footnotes necessary for the complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. These consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in First Defiance's 2006 Annual Report on Form 10-K for the year ended December 31, 2006. However, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for the fair presentation of the financial statements have been made. The results for the three and nine month period ended September 30, 2007 are not necessarily indicative of the results that may be expected for the entire year.

Goodwill

Goodwill is the excess of the purchase price over the fair value of the assets and liabilities of companies acquired through business combinations accounted for under the purchase method. Goodwill is evaluated at the business unit level, which for First Defiance are First Federal and First Insurance. At September 30, 2007 goodwill totaled $36.5 million. The acquisition of Huber, Harger, Welt and Smith (“HHWS”) added $1.4 million of goodwill in 2007.

Income Taxes

The Company’s effective tax rate differs from the statutory 35% federal tax rate primarily because of the existence of municipal securities and bank owned life insurance, the earnings of which are exempt from federal income taxes, partially offset by the excess of fair value over cost of allocated ESOP shares and stock option expense related to incentive option grants which are not deductible for Federal income taxes.

7

2. Basis of Presentation (continued)

Stock Compensation

The Company accounts for stock-based awards in accordance with SFAS 123(R) (revised version of SFAS No. 123) which requires measurement of compensation cost for all stock-based awards be based on the grant-date fair value and recognition of compensation cost over the service period of stock-based awards, which is usually the same as the vesting period. The fair value of stock options and stock grants is determined using the Black-Scholes valuation model. SFAS 123(R) provides for expense recognition, for both new and existing stock-based awards, as the required services are rendered.

The Securities and Exchange Commission (SEC) has published Staff Accounting Bulletin No. 107 (“SAB 107”), which expressed the views of the Staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provided the Staff’s views regarding the valuation of stock-based payment arrangements for public companies. SAB 107 requires that stock-based compensation be classified in the same expense category as cash compensation. Accordingly, the Company has included stock-based compensation and benefits in the condensed consolidated statements of income as part of compensation and benefits.

Segment Information

Statement of Financial Accounting Standards No. 131 requires disclosures about an enterprise’s operating segments. The Statement defines an operating segment as a component of an enterprise that engages in business activities that generates revenue and incurs expense, and the operating results of which are reviewed by the chief operating decision maker in the determination of resource allocation and performance. While the Company’s chief decision-makers monitor the revenue streams of the Company’s various products and services, the identifiable segments that could be separated from the Company’s primary business of community banking are not material based on revenue, net income, or total assets. Accordingly, all of First Defiance’s financial service operations are considered by management to be aggregated in one reportable operating segment.

8

2. Basis of Presentation (continued)

Recent Accounting Pronouncements

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain warranty and insurance contracts at fair value. The Statement applies to all reporting entities and contains financial statement presentation and disclosure requirements for assets and liabilities reported at fair value. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted subject to certain conditions including the adoption of SFAS No. 157 at the same time. First Defiance chose not to early adopt SFAS 159 and is currently assessing whether fair value accounting is appropriate for any of its eligible items and currently can not estimate the impact, if any, on the consolidated financial statements or results of operations.

3. Stock Compensation Plans

First Defiance has established incentive stock option plans for its directors and employees and has reserved 1,727,485 shares of common stock for issuance under the plans. As of September 30, 2007, 422,932 options (411,103 for employees and 11,829 for directors) have been granted and remain outstanding at option prices based on the market value of the underlying shares on the date the options were granted.

The Company can issue incentive stock options and nonqualified stock options under their incentive stock plans. Generally, one-fifth of the options awarded become exercisable on each of the first five anniversaries of the date of grant. The option period expires ten years from the date of grant and the exercise price is the market price at the date of grant.

Following is activity under the plans:

	Nine months ended September 30
	2007					2006
	Options Outstanding			Weighted Average Option Prices		Options Outstanding			Weighted Average Option Prices
Options outstanding, beginning of period		404,154		$	19.36		569,099		$	16.00
Forfeited or cancelled		(2,550	)		25.98		(11,150	)		23.14
Exercised		(32,922	)		14.04		(194,588	)		11.35
Granted		54,250			27.41		48,250			26.49
Options outstanding, end of period		422,932		$	20.76		411,611		$	19.24

9

3. Stock Compensation Plans (continued)

Proceeds, related tax benefits realized from options exercised, and intrinsic value of options exercised were as follows:

	Nine Months Ended September 30
	2007		2006
Proceeds of options exercised	$	462,076	$	2,208,234
Related tax benefit recognized		55,414		409,278
Intrinsic value of options exercised		475,048		2,970,005

The aggregate intrinsic value of all options outstanding at September 30, 2007 was $2.67 million. The aggregate intrinsic value of all options that were exercisable at September 30, 2007 was $2.55 million.

The fair value of stock options granted during the nine months ended September 30, 2007 and 2006 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Nine Months Ended September 30
	2007			2006
Expected average risk-free rate		4.86	%		5.17	%
Expected average life	6.63		years	6.50		years
Expected volatility		21.80	%		22.40	%
Expected dividend yield		3.64	%		3.63	%

The weighted-average fair value of options granted for the nine months ended September 30, 2007 and 2006 were $5.33 and $5.97, respectively.

4. Acquisitions

On October 2, 2007, First Defiance announced the execution of a definitive agreement to acquire Pavilion Bancorp, Inc. and its wholly-owned subsidiary, the Bank of Lenawee, which is headquartered in Adrian, Michigan. Each Pavilion Bancorp shareholder will receive 1.4209 shares of First Defiance common stock and $37.50 in cash. Based on the closing price of First Defiance shares on October 2, 2007, the transaction is valued at $55.7 million or $75.54 per share. As of September 30, 2007, Pavilion Bancorp had $279 million in assets, $239 million in loans and $229 million in deposits at its eight banking offices. The transaction is expected to be completed late in the first quarter of 2008, pending regulatory approvals, the approval of shareholders of Pavilion Bancorp and the completion of other customary closing conditions.

On February 28, 2007, First Defiance acquired HHWS, an insurance agency headquartered in Bowling Green, Ohio for a purchase price comprised of 76,435 shares of First Defiance common stock and future consideration to be paid in cash in 2009 and 2010. As of September 30, 2007, management has determined goodwill of $1.4 million and identifiable intangible assets of $800,000 consisting of customer relationship intangible of $620,000 and a non-compete intangible of $180,000.

10

5. Dividends on Common Stock

As of September 30, 2007, First Defiance had declared a quarterly cash dividend of $.25 per share for the third quarter of 2007, payable on October 26, 2007.

6. Earnings Per Share

Basic earnings per share as disclosed under SFAS No. 128 has been calculated by dividing net income by the weighted average number of shares of common stock outstanding for the three and nine month periods ended September 30, 2007 and 2006. First Defiance accounts for the shares issued to its Employee Stock Ownership Plan ("ESOP") in accordance with Statement of Position 93-6 of the American Institute of Certified Public Accountants ("AICPA"). As a result, shares controlled by the ESOP are not considered in the weighted average number of shares of common stock outstanding until the shares are committed for allocation to an employee's individual account. In the calculation of diluted earnings per share for the three and nine month periods ended September 30, 2007 and 2006, the effect of shares issuable under stock option plans and unvested shares under the Management Recognition Plan have been accounted for using the Treasury Stock method.

The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share data):

	Three months ended September 30,				Nine months ended September 30,
	2007		2006		2007		2006
Numerator for basic and diluted  earnings per share – Net income	$	3,129	$	3,823	$	10,346	$	11,627
Denominator:
Denominator for basic earnings per share – weighted average shares		7,080		7,032		7,101		7,020
Effect of dilutive securities:
Employee stock options		91		114		100		141
Denominator for diluted earnings per       share – adjusted weighted average       shares and assumed conversions		7,171		7,146		7,201		7,161
Basic earnings per share from net income	$	0.44	$	0.54	$	1.46	$	1.66
Diluted earnings per share from  net income	$	0.44	$	0.53	$	1.44	$	1.62

11

7. Investment Securities

The following is a summary of available-for-sale and held-to-maturity securities (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At September 30, 2007
Available-for-Sale Securities:
U.S. Treasury securities and obligations   of U.S. Government corporations and   agencies	$	27,571	$	199	$	(19	)	$	27,751
Mortgage-backed securities		24,542		64		(275	)		24,331
REMICs		3,064		-		(10	)		3,054
Collateralized mortgage obligations		19,730		62		(203	)		19,589
Trust preferred stock		7,887		6		(347	)		7,546
Obligations of state and political subdivisions		28,631		347		(13	)		28,965
Totals	$	111,425	$	678	$	(867	)	$	111,236
Held-to-Maturity Securities:
FHLMC certificates	$	199	$	6	$	-		$	205
FNMA certificates		515		4		(1	)		518
GNMA certificates		162		1		-			163
Obligations of state and political subdivisions		360		33		-			393
Totals	$	1,236	$	44	$	(1	)	$	1,279

At December 31, 2006
Available-for-Sale Securities:
U.S. Treasury securities and obligations   of U.S. Government corporations and   agencies	$	36,108	$	106	$	(171	)	$	36,043
Mortgage-backed securities		18,595		23		(276	)		18,342
REMICs		3,071		-		(11	)		3,060
Collateralized mortgage obligations		20,099		52		(346	)		19,805
Trust preferred stock		8,116		82		(20	)		8,178
Obligations of state and political subdivisions		24,840		418		(4	)		25,254
Totals	$	110,829	$	681	$	(828	)	$	110,682
Held-to-Maturity Securities:
FHLMC certificates	$	272	$	8	$	-		$	280
FNMA certificates		614		5		(4	)		615
GNMA certificates		195		1		-			196
Obligations of state and political   subdivisions		360		41		-			401
Totals	$	1,441	$	55	$	(4	)	$	1,492

12

7. Investment Securities (continued)

The following table summarizes First Defiance’s securities that were in an unrealized loss position at September 30, 2007:

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Month or Longer					Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Losses
	(In Thousands)
At September 30, 2007
Available-for-sale securities:
U.S. treasury securities and obligations of U.S. government corporations and agencies	$	-	$	-		$	6,550	$	(19	)	$	6,550	$	(19	)
Mortgage-backed securities		6,739		(58	)		9,901		(217	)		16,640		(275	)
Collateralized mortgage obligations and REMICs		4,049		(14	)		14,109		(199	)		18,158		(213	)
Trust preferred stock		1,995		(102	)		1,645		(245	)		3,640		(347	)
Obligations of state and political subdivisions		3,522		(11	)		192		(2	)		3,714		(13	)
Held to maturity securities:
Mortgage-backed securities		120		-			144		(1	)		264		(1	)
Total temporarily     impaired securities	$	16,425	$	(185	)	$	32,541	$	(683	)	$	48,966	$	(868	)

First Defiance does not believe the unrealized losses on securities as of September 30, 2007 represent other-than-temporary impairment. The unrealized losses are primarily the result of the changes in interest rates and will not prohibit the Company from receiving its contractual principal and interest payments. First Defiance has the ability and intent to hold these securities for a period necessary for fair value to recover to the amortized cost.

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8. Loans

Loans receivable consist of the following (in thousands):

	September 30, 2007		December 31, 2006
Real Estate:
One-to-four family residential	$	230,075	$	250,808
Construction		15,392		17,339
Non-residential and multi-family		592,914		579,860
		838,381		848,007
Other Loans:
Commercial		267,897		232,914
Consumer finance		38,280		43,770
Home equity and improvement		127,641		122,789
		433,818		399,473
Total real estate and other loans		1,272,199		1,247,480
Deduct:
Loans in process		6,301		6,409
Net deferred loan origination fees and costs		1,026		1,182
Allowance for loan loss		13,427		13,579
Totals	$	1,251,445	$	1,226,310

Changes in the allowance for loan losses were as follows (in $000s):

	Three Months ended September 30,				Nine Months ended September 30,
	2007		2006		2007		2006
Balance at beginning of period	$	13,417	$	14,239	$	13,579	$	13,673
Provision for loan losses		671		373		1,704		1,438
Charge-offs:
One-to-four family residential real estate		128		58		223		269
Non-residential and multi-family real estate		586		134		1,669		364
Commercial		-		85		92		115
Home equity and improvement		10		48		51		101
Consumer finance		25		67		119		296
Total charge-offs		749		392		2,154		1,145
Recoveries		88		78		298		332
Net charge-offs		661		314		1,856		813
Ending allowance	$	13,427	$	14,298	$	13,427	$	14,298

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8. Loans (continued)

The following table presents the aggregate amounts of non-performing assets, comprised of non-accrual loans and real estate owned on the dates indicated:

	September 30, 2007		December 31, 2006
	(in thousands)
Non-accrual loans	$	8,523	$	7,283
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		8,523	$	7,283
Real estate owned (REO)		3,392		2,392
Total non-performing assets	$	11,915	$	9,675

9. Deposits

A summary of deposit balances is as follows (in thousands):

	September 30, 2007		December 31, 2006
Non-interest-bearing checking accounts	$	109,128	$	106,328
Interest-bearing checking and money market accounts		330,168		306,003
Savings accounts		98,719		74,491
Retail certificates of deposit less than $100,000		524,347		493,594
Retail certificates of deposit greater than $100,000		142,645		140,392
Brokered or national certificates of deposit		3,157		17,637
	$	1,208,164	$	1,138,445

10. Borrowings

First Defiance’s debt, Federal Home Loan Bank (FHLB) advances and junior subordinated debentures owed to unconsolidated subsidiary trusts are comprised of the following:

	September 30, 2007		December 31, 2006
	(in thousands)
FHLB Advances:
Overnight borrowings	$	-	$	33,100
Single maturity fixed rate advances		10,000		10,000
Single maturity LIBOR based advances		45,000		45,000
Putable advances		45,000		45,000
Strike-rate advances		27,000		27,000
Amortizable mortgage advances		1,461		2,128
Total	$	128,461	$	162,228
Junior subordinated debentures owed to   unconsolidated subsidiary trusts	$	36,083	$	20,619

15

10. Borrowings (continued)

The putable advances can be put back to the Company at the option of the FHLB on a quarterly basis. The strike-rate advances are putable at the option of the FHLB only when the three month LIBOR rates exceed the agreed upon strike-rate in the advance contract which ranges from 7.5% to 8.0%. The three month LIBOR rate at September 30, 2007 was 5.23%.

In March 2007, the Company formed an affiliated trust, First Defiance Statutory Trust II (the Trust Affiliate) that issued $15 million of Guaranteed Capital Trust Securities (Trust Preferred Securities). In connection with this transaction, the Company issued $15.5 million of Junior Subordinated Deferrable Interest Debentures (Subordinated Debentures) to the Trust Affiliate. The Company formed the Trust Affiliate for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Subordinated Debentures held by the Trust Affiliate are the sole assets of that trust. Distributions on the Trust Preferred Securities issued by the Trust Affiliate are payable quarterly at a fixed rate equal to 6.441% for the first five years and a floating interest rate based on three-month LIBOR plus 150 basis points, repricing quarterly, thereafter.

The Trust Preferred Securities are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on June 15, 2037, but may be redeemed at the Company’s option at any time on or after June 15, 2012, or at any time upon certain events.

A summary of all junior debentures issued by the Company to affiliates follows. These amounts represent the par value of the obligations owed to these affiliates, including the Company’s equity interest in the trusts. Junior subordinated debentures owed to the following affiliates were as follows:

	September 30, 2007		December 31, 2006
First Defiance Statutory Trust I due December 2035	$	20,619	$	20,619
First Defiance Statutory Trust II due June 2037		15,464		-
Total junior subordinated debentures owned to unconsolidated subsidiary Trusts	$	36,083	$	20,619

The Company has used the proceeds of the Junior Debentures issued in March 2007 for general corporate purposes. Interest on both issues of trust preferred securities may be deferred for a period of up to five years at the option of the issuer.

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11. Commitments, Guarantees and Contingent Liabilities

Loan commitments are made to accommodate the financial needs of First Defiance’s customers; however, there are no long-term, fixed-rate loan commitments that result in market risk. Standby letters of credit obligate the Company to pay a third party beneficiary when a customer fails to repay an outstanding loan or debt instrument, or fails to perform some contractual non-financial obligation. Standby letters of credit are issued to address customers’ financing needs and to facilitate customers’ trade transactions.

If amounts are drawn under standby letters of credit, such amounts are treated as loans. Both loan commitments and standby letters of credit have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory and equipment) is obtained based on management’s credit assessment of the customer.

The Company’s maximum obligation to extend credit for loan commitments (unfunded loan and unused lines of credit) and standby letters of credit was as follows:

	September 30, 2007		December 31, 2006
	(In Thousands)
Loan commitments	$	263,982	$	260,349
Standby Letters of Credit		13,331		16,869
Total	$	277,313	$	277,218

The remaining weighted average life for outstanding standby letters of credit was less than one year at September 30, 2007. The Company had $3.8 million of standby letters of credit with a life longer than one year.

12. Postretirement Benefits

First Defiance sponsors a defined benefit postretirement plan that is intended to supplement Medicare coverage for certain retirees who meet minimum age requirements. A description of employees or former employees eligible for coverage is included in Footnote 15 in the financial statements included in First Defiance’s 2006 Annual Report on Form 10-K.

Net periodic postretirement benefit costs include the following components for the three and nine month periods ended September 30, 2007 and 2006:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(In Thousands)
Service cost-benefits attributable to service   during the period	$	12	$	10	$	37	$	30
Interest cost on accumulated post-retirement    benefit obligation		31		27		94		80
Net amortization and deferral		11		8		32		23
Net periodic postretirement benefit cost	$	54	$	45	$	163	$	133

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13. Income Taxes

First Defiance adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $200,000 increase to the liability for uncertain tax positions, which was accounted for as an adjustment to the beginning balance of retained earnings. As of the date of adoption, including the increase in the liability noted above, First Defiance had approximately $533,000 of unrecognized tax benefits. As of September 30, 2007, the Company has $437,000 of unrecognized tax benefits, of which $404,000 would affect the effective tax rate if recognized.

Interest and penalties related to uncertain tax positions are recorded as components of income tax expense. During the quarter ended September 30, 2007 the Company had a net reduction of accrued interest on uncertain tax positions totaling $9,100. For the nine month period ended September 30, 2007, the Company recognized a net reversal of approximately $4,900 of previously recorded accrued interest associated with uncertain tax positions. As of September 30, 2007 the Company has remaining accrued interest of approximately $7,600 related to uncertain tax positions, which is included in the $437,000 noted above. The Company does not expect that the amounts of unrecognized tax benefits will change significantly within the next 12 months.

Federal tax returns for years ended December 31, 2004 and later are subject to audit by the Internal Revenue Service.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

General

First Defiance Financial Corp. (“First Defiance” or “the Company”) is a holding company which conducts business through its two wholly owned subsidiaries, First Federal Bank of the Midwest (“First Federal”) and First Insurance and Investments, Inc. (“First Insurance”). First Federal is a federally chartered savings bank that provides financial services to communities based in northwest Ohio and northeast Indiana where it operates 27 full service branches. First Federal opened its 27^th branch on August 6, 2007 in Fort Wayne, Indiana. First Federal provides a broad range of financial services including checking accounts, savings accounts, certificates of deposit, real estate mortgage loans, commercial loans, consumer loans, home equity loans and trust services. First Insurance sells a variety of property and casualty, group health and life, and individual health and life insurance products and investment and annuity products. Insurance products are sold through First Insurance’s offices in Defiance and Bowling Green, Ohio while investment and annuity products are sold through registered investment representatives located at certain First Federal banking center locations.

First Defiance invests in U.S. Treasury and federal government agency obligations, obligations of municipal and other political subdivisions, mortgage-backed securities which are issued by federal agencies, corporate bonds, and collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). Management determines the appropriate classification of all such securities at the time of purchase in accordance with FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities.

Securities are classified as held-to-maturity when First Defiance has the positive intent and ability to hold the security to maturity. Held-to-maturity securities are stated at amortized cost and had a recorded value of $1.2 million at September 30, 2007. Securities not classified as held-to-maturity are classified as available-for-sale, which are stated at fair value and had a recorded value of $111.2 million at September 30, 2007. The available-for-sale portfolio consists of U.S. Treasury securities and obligations of U.S. Government corporations and agencies ($27.8 million), certain municipal obligations ($29.0 million), CMOs and REMICs ($22.6 million), mortgage backed securities ($24.3 million) and preferred stock ($7.5 million).

In accordance with SFAS No. 115, unrealized holding gains and losses deemed temporary on available-for-sale securities are reported in a separate component of stockholders' equity, net of tax, and are not reported in earnings until realized. Net unrealized holding losses on available-for-sale securities were $189,000 at September 30, 2007, or $123,000 after considering the related deferred tax asset.

The profitability of First Defiance is primarily dependent on its net interest income and non-interest income. Net interest income is the difference between interest income on interest-earning assets, principally loans and securities, and interest expense on interest-bearing deposits, Federal Home Loan Bank advances, and other borrowings. The Company’s non-interest income includes deposit and loan servicing fees, mortgage banking income, and insurance commissions. First Defiance's earnings also depend on the provision for loan losses and non-interest expenses, such as employee compensation and benefits, occupancy and equipment expense, deposit insurance premiums, and miscellaneous other expenses, as well as federal income tax expense.

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Forward-Looking Information

Certain statements contained in this quarterly report that are not historical facts, including but not limited to statements that can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “anticipate”, or “continue” or the negative thereof or other variations thereon or comparable terminology 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 differ materially from those indicated in such statements due to risks, uncertainties and changes with respect to a variety of market and other factors.

Changes in Financial Condition

At September 30, 2007, First Defiance's total assets, deposits and stockholders' equity amounted to $1.58 billion, $1.21 billion and $164.7 million, respectively, compared to $1.53 billion, $1.14 billion and $159.8 million, respectively, at December 31, 2006.

Net loans receivable (excluding loans held for sale) were $1.25 billion at September 30, 2007 compared to $1.23 billion at December 31, 2006. Between December 31, 2006 and September 30, 2007 commercial loans and commercial real estate loans increased by $35.0 million and $13.1 million, respectively, while one-to-four family residential real estate loans and consumer loans declined by $20.7 million and $5.5 million, respectively. The growth in commercial loan balances is the result of continued opportunities in First Defiance’s market area. While this market area cannot be characterized as high growth, the Company has been successful in growing its commercial loan and commercial real estate loan portfolios by taking market share from other financial institutions. The decline in one-to-four family residential real estate loans is due to the Company selling the majority of its residential mortgage originations in the secondary market while existing loans continue to pay down. The decline in consumer loan balances is the result of the Company not aggressively pursuing opportunities with that product line.

The investment securities portfolio increased slightly to $112.5 million at September 30, 2007 from $112.1 million at December 31, 2006. The increase is the result of $20.5 million of securities being purchased during the first nine months of 2007 mostly offset by $12.3 million of securities being matured or called in the period and principal pay downs of $5.2 million in CMOs and mortgage-backed securities. The unrealized loss in the investment portfolio increased modestly to $189,000 at September 30, 2007 from $147,000 at December 31, 2006.

Deposits increased from $1.14 billion at December 31, 2006 to $1.21 billion as of September 30, 2007. Of the $69.7 million increase, non-interest bearing demand deposits increased $2.8 million to $109.1 million, savings deposits increased $24.2 million to $98.7 million, interest-bearing demand deposits and money market accounts increased $24.2 million to $330.2 million, and retail time deposits increased $33.0 million to $667.0 million. During the same period, brokered time deposits decreased $14.5 million to $3.2 million. The increase in core deposits from the beginning of the year is the result of increased corporate-wide promotional efforts and a general increase in interest rates. Brokered deposits decreased as First Defiance has been able to fund its growth with core deposits.

20

Additionally, FHLB advances decreased $33.8 million to $128.5 million at September 30, 2007 from $162.2 million at December 31, 2006. An increase in deposits coupled with loan growth being up modestly and the completion of a $15 million trust preferred issuance combined to allow First Defiance to repay all of its overnight FHLB advances, which totaled $33.1 million at December 31, 2006.

In March 2007, the Company issued $15.5 million of Subordinated Debentures. These debentures were issued to an unconsolidated affiliated trust that purchased them with proceeds from a $15.0 million issue of trust preferred securities to an outside party. The proceeds of the Subordinated Debentures were used for general corporate purposes. The Subordinated Debentures will have a fixed rate of 6.441% for the first five years and a floating interest rate based on three-month LIBOR plus 150 basis points, repricing quarterly, thereafter.

Stockholders’ equity increased from $159.8 million at December 31, 2006 to $164.7 million at September 30, 2007. The increase is primarily the result of net income of $10.3 million and $2.3 million of stock issued in conjunction with the HHWS acquisition. Those increases were partially offset by $5.3 million of cash dividends and $4.3 million of treasury share repurchases.

21

Average Balances, Net Interest Income and Yields Earned and Rates Paid

The following table presents for the periods indicated the total dollar amount of interest from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in thousands of dollars and rates, and the net interest margin. The table reports interest income from tax-exempt loans and investment on a tax-equivalent basis. All average balances are based upon daily balances.

	Three Months Ended September 30,
	2007							2006
	Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,244,531	$	22,995		7.33	%	$	1,225,456	$	22,346		7.23	%
Securities		112,645		1,615		5.66			119,628		1,625		5.35
Interest-earning deposits		21,760		262		4.78			580		7		4.79
FHLB stock and other		18,585		305		6.51			18,050		262		5.76
Total interest-earning assets		1,397,521		25,177		7.14			1,363,714		24,240		7.05
Non-interest-earning assets		152,653							148,930
Total assets	$	1,550,174						$	1,512,644
Interest-bearing liabilities:
Deposits	$	1,074,413	$	10,536		3.89	%	$	1,030,433	$	9,140		3.52	%
FHLB advances and other		128,597		1,636		5.05			175,255		2,256		5.11
Notes payable		24,935		193		3.07			19,749		144		2.89
Subordinated debentures		36,295		597		6.53			20,619		343		6.60
Total interest-bearing liabilities		1,264,240		12,962		4.07			1,246,056		11,883		3.78
Non-interest bearing deposits		103,181		-					93,964		-
Total including non-interest bearing
demand deposits		1,367,421		12,962		3.76			1,340,020		11,883		3.52
Other non-interest-bearing liabilities		18,002							16,607
Total liabilities		1,385,423							1,356,627
Stockholders' equity		164,751							156,017
Total liabilities and stock-
holders' equity	$	1,550,174						$	1,512,644
Net interest income; interest
rate spread			$	12,215		3.07	%			$	12,357		3.27	%
Net interest margin (3)						3.47	%						3.59	%
Average interest-earning assets
to average interest-bearing
liabilities						111	%						109	%

_____________________________

(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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	Nine Months Ended September 30,
	2007							2006
	Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,233,987	$	67,916		7.36	%	$	1,204,142	$	63,622		7.06	%
Securities		112,466		4,795		5.68			116,215		4,670		5.34
Interest-earning deposits		12,461		483		5.18			3,992		145		4.86
FHLB stock and other		18,585		898		6.46			17,797		765		5.75
Total interest-earning assets		1,377,499		74,092		7.19			1,342,146		69,202		6.89
Non-interest-earning assets		151,905							146,633
Total assets	$	1,529,404						$	1,488,779
Interest-bearing liabilities:
Deposits	$	1,053,810	$	30,130		3.82	%	$	999,977	$	23,835		3.19	%
FHLB advances and other		139,087		5,253		5.05			185,826		6,778		4.88
Notes payable		22,920		519		3.03			19,224		403		2.80
Subordinated debentures		31,147		1,518		6.52			20,619		962		6.24
Total interest-bearing liabilities		1,246,964		37,420		4.01			1,225,646		31,978		3.49
Non-interest bearing deposits		100,908		-					93,492		-
Total including non-interest bearing
demand deposits		1,347,872		37,420		3.71			1,319,138		31,978		3.24
Other non-interest-bearing liabilities		18,042							15,348
Total liabilities		1,365,914							1,334,486
Stockholders' equity		163,490							154,293
Total liabilities and stock-
holders' equity	$	1,529,404						$	1,488,779
Net interest income; interest
rate spread			$	36,672		3.18	%			$	37,224		3.40	%
Net interest margin (3)						3.56	%						3.71	%
Average interest-earning assets
to average interest-bearing
liabilities						110	%						110	%

____________________________

(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.

23

Results of Operations

Three Months Ended September 30, 2007 and 2006

On a consolidated basis, First Defiance’s net income for the quarter ended September 30, 2007 was $3.1 million compared to income of $3.8 million for the comparable period in 2006. On a per share basis, basic and diluted earnings per share for the three months ended September 30, 2007 were $0.44, compared to basic and diluted earnings per share of $0.54 and $0.53, respectively, for the quarter ended September 30, 2006.

Net Interest Income.

The Federal Reserve Board influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. The Company’s loan portfolio is affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit, began 2006 at 7.25% and increased 50 basis points in the first quarter and 50 basis points in the second quarter to end the year at 8.25%. During the first and second quarters of 2007, the prime interest rate remained unchanged at 8.25%. The prime interest rate was reduced 50 basis points to 7.75% late in the third quarter of 2007. The federal funds rate, which is the cost of immediately available overnight funds has moved in a similar manner, beginning 2006 at 4.25%. During 2006, the federal funds rate increased 50 basis points in the first quarter and 50 basis points in the second quarter to end the year at 5.25%. During the first and second quarters of 2007, the federal funds rate remained unchanged at 5.25%. The federal funds rate was reduced 50 basis points to 4.75% in September of 2007.

Net interest income was $12.0 million for the third quarter of 2007 compared to $12.2 million in the third quarter of 2006. Net interest income, the difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the most significant component of First Defiance’s earnings and is affected by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. Net interest income declined despite a $33.8 million increase in the average balance of interest-earning assets between the third quarter of 2006 and the third quarter of 2007. The average balance of loans receivable increased to $1.24 billion for the third quarter of 2007 from $1.23 billion in the third quarter of 2006. The yield on loans receivable increased 10 basis points, to 7.33% in 2007 from 7.23% in 2006. The overall yield on interest-earning assets increased to 7.14% in the third quarter of 2007 compared to 7.05% for the same period in 2006. For the third quarter of 2007, total interest income was $25.0 million, an $897,000 increase over the third quarter of 2006. Interest income was negatively impacted in the third quarter of 2007 by an increase in the balance of loans that were delinquent by more than 90 days. It is the Company’s policy to reverse interest accrued on loans when they become 90 days past due. As a result of this increase, interest income was reduced by $325,000 in the third quarter of 2007 compared to $93,000 for the same period in 2006.

The increase in interest income was more than offset by a $1.1 million increase in interest expense, which totaled $13.0 million for the third quarter of 2007 compared to $11.9 million for the same period in 2006. The majority of the increase in interest expense was in interest-bearing deposits, where average balances increased $44.0 million to $1.07 billion for the third quarter of

24

2007, compared to $1.03 million for the same period in 2006. The cost of those average deposits increased 37 basis points between the 2006 and 2007 third quarters, to 3.89% from 3.52%. The cost of interest-bearing liabilities increased to 4.07% for the 2007 quarterly period, up from 3.78% in 2006, an increase of 29 basis points.

Net interest margin for the quarter ended September 30, 2007 was 3.47%, a 12 basis point decline from the 2006 third quarter margin of 3.59%. The Company's interest rate spread declined to 3.07% in the 2007 third quarter compared to 3.27% in the same 2006 quarterly period.

Provision for Loan Losses.

The provision for loan losses is determined by management as the amount to be added to the allowance for loan losses after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb probable losses within the existing loan portfolio. The provision for loan losses was $671,000 in the third quarter of 2007 compared to $373,000 for the third quarter of 2006. The period over period increase was due to increase in charge-offs in the 2007 third quarter compared to 2006, an increase in the level of non-performing loans and a higher level of portfolio growth in the 2007 third quarter compared to the 2006 period. Charge-offs for the third quarter of 2007 were $749,000 and recoveries of previously charged off loans totaled $88,000 for net charge-offs of $661,000. By comparison, $392,000 of charge-offs were recorded in the 2006 third quarter and $78,000 of recoveries were realized for net charge-offs of $314,000. Of the $749,000 of loans charged off in the 2007 third quarter, $386,000 were specifically reserved for in the prior quarter allowance for loan losses. As a percentage of average loans, annualized net charge-offs were 0.21% for the third quarter of 2007 compared to 0.10% in the same period in 2006.

Non-performing assets, which include non-accrual loans and real estate owned, increased to $11.9 million at September 30, 2007 from $10.0 million at September 30, 2006 and from $9.7 million at December 31, 2006. Non-performing assets and asset quality ratios for First Defiance were as follows at September 30, 2007 and December 31, 2006:

	September 30, 2007			December 31, 2006
	(in thousands)
Non-accrual loans	$	8,523		$	7,283
Loans over 90 days past due and still accruing		-			-
Total non-performing loans	$	8,523		$	7,283
Real estate owned (REO)		3,392			2,392
Total non-performing assets	$	11,915		$	9,675
Allowance for loans losses as a percentage of total loans		1.06	%		1.10	%
Allowance for loan losses as a percentage of non- performing assets		112.69	%		140.35	%
Allowance for loan losses as a percentage of non- performing loans		157.54	%		186.45	%
Total non-performing assets as a percentage of total assets		0.75	%		0.64	%
Total non-performing loans as a percentage of total loans		0.67	%		0.58	%

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Of the $8.5 million in non-accrual loans, $459,000 were 1-4 family residential loans, $7.6 million were commercial or commercial real estate loans and $461,000 were home equity or consumer loans.

The increase in non-performing loans between December 31, 2006 and September 30, 2007 relates primarily to two commercial relationships totaling $5.8 million. The most significant of these relationships is a series of development loans which total $4.5 million in suburban Toledo, Ohio. At September 30, 2007 the specific allowance for loan loss associated with this relationship totaled $1.0 million. The other new large non-accrual loan relationship is the result of the failure of our customer’s tenant to make rental payments as agreed. The analysis of the collateral associated with those loans indicates that the loans are well secured and no specific allowance is deemed necessary.

First Federal Bank’s Asset Review Committee meets monthly to review the status of work-out strategies for all criticized relationships, which by definition would include all non-accrual loans. Based on such factors as anticipated collateral values in liquidation scenarios, cash flow projections, assessment of net worth of guarantors and all other factors which may mitigate risk of loss, the Asset Review Committee makes recommendations regarding required allowances and proposed charge-offs which are approved by the Senior Loan Committee (in the case of charge-offs) or the Loan Loss Reserve Committee (in the case of specific allowances). At September 30, 2007 the specific allowance for loan losses recorded against the $7.6 million of non-accrual commercial and commercial real estate loans totaled $1.25 million, with most of that associated with the large Toledo area customer noted above. In management’s opinion, the allowance for loan losses is appropriate. The allowance for loan losses at September 30, 2007 was $13.4 million compared to $13.6 million at December 31, 2006.

Non-Interest Income.

Total non-interest income increased to $5.6 million in the third quarter of 2007, compared with $5.1 million in the same period in 2006.

Service Fees. Service fees and other charges increased by $184,000 or 7.1% in the 2007 third quarter compared to the same period in 2006. The increase was primarily related to checking account charges, which have continued to increase since the March 2006 implementation of an overdraft privilege product.

First Defiance’s overdraft privilege program generally provides for the automatic payment of modest overdraft limits on all accounts deemed to be in good standing when the account is accessed using paper-based check processing, a teller withdrawal, a point-of-sale terminal, an ACH transaction, or an ATM. To be in good standing, an account must be brought to a positive balance within a 30-day period. Overdraft limits are established for all customers without discrimination using a risk assessment approach for each account classification. The approach includes a systematic review and evaluation of the normal deposit flows made to each account classification to establish reasonable and prudent negative balance limits that would be routinely repaid by normal, expected and reoccurring deposits. The risk assessment by portfolio approach assumes a minimal degree of undetermined credit risk associated with unidentified individual accounts. An allowance for losses is recognized for any accounts that are overdrawn for 30 or more days. Accounts overdrawn for more than 60 days are automatically charged off. Fees are charged as a one-time fee per occurrence and the fee charged for an item that is paid is equal to the fee charged for a non-sufficient fund item that is returned.

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Overdrawn balances, net of allowance for losses, are reflected as loans on First Defiance’s balance sheet. The fees charged for this service are established based both on the return of processing costs plus a profit, and on the level of fees charged by competitors in the Company’s market area for similar services. These fees are considered to be compensation for providing a service to the customer and therefore are deemed to be non-interest income rather than interest income. Fee income recorded for the quarter ended September 30, 2007 related to the overdraft privilege product, net of adjustments to the allowance for uncollectible overdrafts, were $1.9 million compared to $1.7 million for the same period in 2006. Accounts charged off are included in non-interest expense. The period over period increase is due to increased usage of the program by customers and a reduction in the amount of fees being waived. That allowance has remained relatively constant since it was initially recorded ($156,000 at June 30, 2006) and stood at $116,000 at September 30, 2007 compared to $160,000 at September 30, 2006.

Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage loans remained relatively flat totaling $921,000 for the third quarter of 2007 compared to $923,000 for the same period of 2006. Gains realized from the sale of mortgage loans decreased $13,000 to $674,000 for the three months ended September 30, 2007 from $687,000 during the 2006 third quarter. Mortgage loan servicing revenue increased $17,000 in the third quarter of 2007 compared to the third quarter of 2006.

Insurance and Investment Sales Commission. Insurance and investment sales commission income increased $199,000, to $1.2 million in the third quarter of 2007, from $981,000 during the third quarter of 2006. The growth in insurance and investment income is due to the February acquisition of HHWS.

Other Non-Interest Income. Other sources of non-interest income include gains from the sale of non-mortgage loans, trust income, gains from the sale of securities, earnings from bank-owned life insurance and other. Income from BOLI increased by $71,000 in the third quarter of 2007, the result of a $2 million purchase of additional insurance in the first quarter of 2007 and a switch to a higher-yielding separate account insurance product. The sale of agricultural loans increased the third quarter of 2007 non-mortgage loan gains by $75,000 to $138,000 compared to $63,000 in the third quarter of 2006. Other non-interest income declined in the third quarter of 2007 by $43,000 from $187,000 in the third quarter of 2006. This decline is attributed to recording a gain of $115,000 in the third quarter of 2006 resulting from the sale of the former Woodlawn Avenue facility in Napoleon, Ohio.

Non-Interest Expense.

Non-interest expense increased to $12.3 million for the third quarter of 2007 compared to $11.1 million for the same period in 2006. The 2007 third quarter results include $220,000 of direct expenses related to the late August flooding which significantly damaged the Company’s branch facilities in downtown Findlay, Ohio and Ottawa, Ohio. These expenses include the write-off of damaged furniture and computer equipment, clean-up, repairs to heating and air conditioning units, drywall, window coverings, wallpaper and carpet. In addition, the Company made

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contributions totaling $20,000 to social service agencies in Hancock and Putnam counties to assist with the disaster recovery efforts in those communities. The quarterly after-tax impact of the flooding was $156,000 or $0.02 per diluted share. Management estimates that additional pre-tax expense of $290,000 will be incurred in the fourth quarter of 2007 to restore the downtown Findlay facility to its pre-flood condition. The losses associated with the worst flooding in a century of Ohio’s Blanchard River were not covered by insurance.

Compensation and Benefits. Compensation and benefits increased to $6.4 million for the quarter ended September 30, 2007 from $6.2 million for the same period in 2006. In the third quarter of 2007, the Company incurred a $149,000 increase in the group health insurance expense when compared to the same period in 2006, the result of both higher claims and a higher level of projected costs in the new plan year, which began May 1, 2007. Also, actual compensation increased quarter over quarter as a result of normal year-over-year salary increases, the acquired HHWS insurance agency and the staffing of the Fort Wayne, Indiana branch which opened in August 2007. Compensation expense was favorably impacted in the third quarter of 2007 by the reversal of previously recorded accruals for incentive compensation based on management’s estimate of lower payouts under bonus plans than previously estimated.

Occupancy. Occupancy costs increased $238,000 in the third quarter of 2007 mainly as a result of recording $133,000, net of minimal insurance proceeds on various contents, for flood costs and repairs. Also impacting the third quarter of 2007 are expenses associated with the newly leased facility in Fort Wayne, Indiana and the HHWS acquisition.

Other Non-Interest Expenses. Other non-interest expenses (including state franchise tax, data processing, amortization of intangibles and other) increased by $754,000 to $4.4 million for the quarter ended September 30, 2007 from $3.6 million for the same period in 2006. Significant increases between the 2007 and 2006 third quarters include an increase in expense for other real estate owned expenses up $266,000, advertising and public relations expenses up $179,000, attorney fees up $90,000 and $87,000 for the write-off of fixed assets destroyed by the flood. The increase in expenses for real estate owned is due primarily to losses realized on the disposal of properties, the $100,000 write-down of a commercial building taken into OREO late in the second quarter following the receipt of the final appraisal of that property, and the payment of real estate taxes on that building.

The efficiency ratio for the third quarter of 2007 was 69.16% compared to 63.68% for the third quarter of 2006.

Income Taxes.

First Defiance computes federal income tax expense in accordance with FASB Statement No. 109, which resulted in an effective tax rate of 32.62% for the quarter ended September 30, 2007 compared to 34.14% for the same period in 2006. The effective tax rate is lower than the Company’s statutory 35% rate because it has approximately $29.4 million invested in municipal securities, and $28.3 million of bank owned life insurance which are both exempt from federal tax. Those book-tax differences are partially offset by the excess of fair value over cost of allocated ESOP shares and costs associated with expensing incentive stock options, which are not deductible for Federal income taxes.

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Nine Months Ended September 30, 2007 and 2006

On a consolidated basis, First Defiance recognized net income for the nine months ended September 30, 2007 of $10.3 million compared to income of $11.6 million for the comparable period in 2006. On a per share basis, basic and diluted earnings per share for the nine months ended September 30, 2007 were $1.46 and $1.44, respectively, compared to basic and diluted earnings per share of $1.66 and $1.62, respectively, for the nine months ended September 30, 2006.

Net Interest Income.

Interest income increased by $4.8 million to $73.6 million for the nine months ended September 30, 2007 from $68.8 for the nine months ended September 30, 2006. Interest on loans increased $4.3 million due both to a $29.8 million increase in the average balance of loans outstanding between the two periods and a 30 basis point increase on the average yield on loans (to 7.36% for the nine months ended September 30, 2007 compared to 7.06% for the same period in 2006).

Interest expense increased by $5.4 million to $37.4 million for the nine months ended September 30, 207 compared to $32.0 million in the same period of 2006. The average balance of interest-bearing liabilities increased by $21.3 million between the nine month periods of 2006 and 2007 (deposits increased by $53.8 million, FHLB advances declined by $46.7 million, and notes payable and subordinated debentures increased by $3.7 million and $10.5 million respectively). The average cost of interest-bearing deposits for the nine months ending September 30, 2007 was 4.01%, a 52 basis point increase from the 3.49% average cost in the same period of 2006.

Net interest income for the nine months ended September 30, 2007 was $36.1 million compared to $36.8 million for the nine months ended September 30, 2006. Net interest income declined despite the $35.4 million increase in interest-earning assets between the first nine months of 2007 and the same period in 2006. Net interest margin for the first nine months of 2007 was 3.56%, down 15 basis points from the 3.71% margin realized in the same period of 2006. The Company's interest rate spread has declined to 3.18% for the first nine months of 2007 compared to 3.40% in the same period of 2006.

Provision for Loan Losses.

The provision for loan losses was $1.7 million for the nine months ended September 30, 2007, compared to $1.4 million recognized during the nine months ended September 30, 2006. The provision recorded during the 2007 year-to-date period reflects a higher level of net charge-offs, which totaled $1.9 million compared to $813,000 for the nine-month period ended September 30, 2006. Factors that contribute to the provision for loan losses include net charge-offs, management’s assessment of specific allowances needed for classified assets, and general reserves recorded to reflect overall growth in the loan portfolio. While charge-offs increased significantly between 2006 and 2007, the level of allowance required for classified loans has remained constant, a significant number of the loans charged off were previously provided for, and the level of growth in commercial loans and commercial real estate loans was less in 2007 than it was in 2006. During the first nine months of 2007, commercial and commercial real estate loans increased by $48.0 million. Growth of those portfolios in 2006 was $76.3 million. Management believes the balance of the allowance for loan losses is appropriate.

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Non-Interest Income.

Total non-interest income increased to $16.9 million for the period ended September 30, 2007 from $14.7 million recognized in the same period of 2006.

Service Fees. Service fees and other charges increased by $1.3 million or 20.1% in the nine months ended September 30, 2007 compared to the same period in 2006. The increase was primarily related to the March 2006 implementation of an overdraft privilege product as discussed in the quarterly analysis. Income associated with the overdraft privilege product totaled $5.5 million in the first nine months of 2007 compared to $4.6 million in same period of 2006.

Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage loans increased 9.3% to $2.8 million for the nine months ended September 30, 2007 from $2.5 million for the same period of 2006. Gains realized from the sale of mortgage loans increased $184,000 to $2.0 million for the first nine months of 2007 from $1.8 million during the same period of 2006. Mortgage loan servicing revenue increased $101,000 in the first nine months of 2007 compared to the same period of 2006. These increases were slightly offset by a $26,000 increase in the amortization of mortgage servicing rights in the first nine months of 2007 when compared to the same period of 2006.

Insurance and Investment Sales Commission. Insurance and investment sales commission income increased $601,000, to $4.2 million for the nine months ended September 30, 2007, from $3.6 million during the same period of 2006. Contingent commissions increased $275,000 in the first nine months of 2007 to $814,000 from $539,000 in the same period in 2006. These contingent commissions are amounts paid by various property and casualty insurance companies and are based on growth of premiums with these companies and favorable claims experience. The 2007 year-to-date results also include the activity relating to the HHWS acquisition which was completed on February 28, 2007.

Other Non-Interest Income. Other sources of non-interest income include gains from the sale of non-mortgage loans, trust income, earnings from bank-owned life insurance and other. Income from BOLI increased by $199,000 in the first nine months of 2007, the result of a $2 million purchase of additional insurance in the first quarter of 2007 and a switch to a higher-yielding separate account insurance product. Non-mortgage loan gains declined $295,000 in the first nine months of 2007 compared to the same period in 2006. The decline was a due to First Defiance recognizing a gain of $400,000 in the 2006 second quarter following the sale of its credit card portfolio.

Non-Interest Expense.

Non-interest expense increased to $36.0 million for the nine months ended September 30, 2007 compared to $32.6 million for the same period in 2006.

Compensation and Benefits. Compensation and benefits increased to $19.6 million for the nine months ended September 30, 2007 from $18.3 million for the same period in 2006. The increase related to a number of factors including the addition of several high level administrative positions since mid-2006, the opening of the Lima Shawnee branch in mid-year 2006 and the Fort Wayne Branch in August 2007, the acquisition of the HHWS insurance agency in February 2007 and incentive compensation paid on the higher level of insurance contingent income. Also, the

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Company experienced a $316,000 increase in its group health insurance expense for the first nine months of 2007 when compared to the prior year, the result of both higher claims and an increase in the number of participants.

Occupancy. Occupancy costs increased $531,000 for the nine months ended September 30, 2007 from the same period of 2006. The increase is due to the addition of the Lima Shawnee and Fort Wayne branches, the acquisition of HHWS and the costs related to the Findlay and Ottawa flood damages more fully discussed in the quarterly results. The majority of the remaining expense increases relate to the Company’s overall growth initiatives.

Other Non-Interest Expenses. Other non-interest expenses (including state franchise tax, data processing, amortization of intangibles and other) increased by $1.4 million to $12.0 million for the nine months ended September 30, 2007 from $10.6 million for the same period in 2006. The period over period increase is mainly due to advertising and public relations expense being up $354,000, check charge-offs and other related costs being up $85,000 and the flood related fixed asset write-offs of $87,000. In addition, the Company recorded $359,000 for a full nine months of expense associated with its overdraft privilege program in 2007 compared to just $252,000 recorded in 2006 for less than seven full months of the program. The efficiency ratio for the first nine months of 2007 was 67.18% compared to 62.84% for the same period of 2006.

Income Taxes.

First Defiance computes federal income tax expense in accordance with FASB Statement No. 109, which resulted in an effective tax rate of 32.56% for the nine months ended September 30, 2007 compared to 33.22% for the same period in 2006.

Liquidity and Capital Resources

As a regulated financial institution, First Federal is required to maintain appropriate levels of "liquid" assets to meet short-term funding requirements.

First Defiance generated $9.1 million of cash from operating activities during the first nine months of 2007. The Company's cash from operating activities resulted from net income for the period, adjusted for various non-cash items, including the provision for loan losses, depreciation and amortization of mortgage servicing rights, gain on sales of securities, loans and property, plant and equipment, ESOP expense related to release of shares, changes in loans available for sale, interest receivable, other assets, and other liabilities. The primary investing activity of First Defiance is the origination of loans, which is funded with cash provided by operations, proceeds from the amortization and prepayments of existing loans, the sale of loans, proceeds from the sale or maturity of securities, borrowings from the FHLB, and customer deposits.

At September 30, 2007, First Defiance had $94.2 million in outstanding loan commitments and loans in process to be funded generally within the next nine months and an additional $183.1 million committed under existing consumer and commercial lines of credit and standby letters of credit. Also at that date, First Defiance had commitments to sell $9.0 million of loans held-for-sale. Also, the total amount of certificates of deposit that are scheduled to mature by September 30, 2008 is $554.0 million. First Defiance believes that it has adequate resources to fund commitments as

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they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate environments. If First Defiance requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial institutions are available.

First Federal is required to maintain specified amounts of capital pursuant to regulations promulgated by the OTS. The capital standards generally require the maintenance of regulatory capital sufficient to meet a tangible capital requirement, a core capital requirement, and a risk-based capital requirement. The following table sets forth First Federal's compliance with each of the capital requirements at September 30, 2007.

	Core Capital						Risk-Based Capital
	Adequately Capitalized			Well Capitalized			Adequately Capitalized			Well Capitalized
Regulatory capital	$	152,669		$	152,669		$	166,096		$	166,096
Minimum required regulatory capital		61,434			76,792			106,101			132,626
Excess regulatory capital	$	91,235		$	75,877		$	59,995		$	33,470
Regulatory capital as a percentage of assets (1)		9.9	%		9.9	%		12.5	%		12.5	%
Minimum capital required as a percentage of assets		4.0	%		5.0	%		8.0	%		10.0	%
Excess regulatory capital as a percentage of assets		5.9	%		4.9	%		4.5	%		2.5	%

(1) Core capital is computed as a percentage of adjusted total assets of $1.54 billion. Risk-based capital is computed as a percentage of total risk-weighted assets of $1.33 billion.

High Loan-to-Value Mortgage Loans

The majority of First Defiance’s mortgage loans are collateralized by one-to-four family residential real estate, have loan-to-value ratios of 80% or less, and are made to borrowers in good credit standing. First Federal usually requires residential mortgage loan borrowers whose loan-to-value is greater than 80% to purchase private mortgage insurance (PMI). First Federal does originate and retain a limited number of residential mortgage loans with loan-to-value ratios that exceed 80% where PMI is not required if the borrower possesses other demonstrable strengths. The loan-to-value ratios on these loans are generally limited to 85% and exceptions must be approved by First Federal’s senior loan committee. Management monitors the balance of one-to-four family residential loans, including home equity loans and committed lines of credit that exceed certain loan-to-value standards (90% for owner occupied residences, 85% for non-owner occupied residences and one-to-four family construction loans, 75% for developed land and 65% for raw land). Total loans that exceed those standards at September 30, 2007 totaled $28.8 million. These loans are generally paying as agreed. First Defiance does not make interest-only first mortgage residential loans, nor does it have residential mortgage loan products, or other consumer products, that allow negative amortization.

Pending Acquisition

On October 2, 2007, First Defiance entered into an Agreement and Plan of Merger with Pavilion Bancorp, Inc. Under the terms of the agreement, First Defiance will acquire Pavilion and its wholly

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owned subsidiary, Bank of Lenawee, which is headquartered in Adrian, Michigan. First Defiance has agreed to purchase the outstanding shares of Pavilion for 1.4209 shares of First Defiance common stock plus $37.50 in cash. Management expects one-time costs, including acquisition-related and restructuring charges, will not exceed $3.8 million on a pre-tax basis over the integration period. The cash portion of the acquisition will be financed from existing sources of liquidity, including a line of credit facility at First Defiance.

Upon completion of the acquisition, on a pro forma basis using September 30, 2007 data, First Defiance will have $1.86 billion in total assets, $1.50 billion in loans, $1.43 billion in total deposits, and $228.7 million in shareholders’ equity. The acquisition is expected to result in approximately $22.0 million in additional goodwill and other intangibles. Management expects the transaction, which is subject to regulatory and Pavilion shareholder approval, to close in the first quarter of 2008.

The Company had previously announced that concurrent with the regulatory approval process for the merger First Defiance Financial Corp. would apply to the Federal Reserve Board for approval to convert to a bank holding company and its subsidiary, First Federal Bank of the Midwest would seek approval to convert to a national bank charter. Subsequent to that announcement, management has determined that it is currently in the Company’s best interest for First Federal to retain its federal savings bank charter and to continue under the regulation of the Office of Thrift Supervision at the bank and holding company levels.

Critical Accounting Policies

First Defiance has established various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of its financial statements. The significant accounting policies of First Defiance are described in the footnotes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K. Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. Those policies which are identified and discussed in detail in the Company’s Annual Report on Form 10-K include the Allowance for Loan Losses and the Valuation of Mortgage Servicing Rights. There have been no material changes in assumptions or judgments relative to those critical policies during the first nine months of 2007.

Item 3. Qualitative and Quantitative Disclosure About Market Risk

As discussed in detail in the 2006 Annual Report on Form 10-K, First Defiance’s ability to maximize net income is dependent on management’s ability to plan and control net interest income through management of the pricing and mix of assets and liabilities. Because a large portion of assets and liabilities of First Defiance are monetary in nature, changes in interest rates and monetary or fiscal policy affect its financial condition and can have significant impact on the net income of the Company. First Defiance does not use off balance sheet derivatives to enhance its risk management, nor does it engage in trading activities beyond the sale of mortgage loans.

First Defiance monitors its exposure to interest rate risk on a monthly basis through simulation analysis which measures the impact changes in interest rates can have on net income. The

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simulation technique analyzes the effect of a presumed 100 basis point shift in interest rates (which is consistent with management’s estimate of the range of potential interest rate fluctuations) and takes into account prepayment speeds on amortizing financial instruments, loan and deposit volumes and rates, non-maturity deposit assumptions and capital requirements. The results of the simulation indicate that in an environment where interest rates rise or fall 100 basis points over a 12 month period, using September 30, 2007 amounts as a base case, First Defiance’s net interest income would be impacted by less than the board mandated guidelines of 10%.

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Item 4.Controls and Procedures

Disclosure Controls are procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2007, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in the internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

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FIRST DEFIANCE FINANCIAL CORP.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

First Defiance is not engaged in any legal proceedings of a material nature.

Item 1A.   Risk Factors

  There were no material changes to the risk factors as presented in First Defiance Financial Corp.’s annual report on Form 10-K for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Period	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (a)
July 1, 2007 –  July 31, 2007	20,473	$26.93	20,473	224,844
August 1, 2007 –  August 31, 2007	56,283	$26.70	56,283	168,561
Sept. 1, 2007 –  Sept. 30, 2007	5,721	$28.21	5,721	162,840
Total for 2007  Third Quarter	82,477	$26.87	82,477	162,840

(a) On July 18, 2003, the registrant announced that its Board of Directors had authorized management to repurchase up to 10% of the Registrant’s common stock through the open market or in any private transaction. The authorization, which is for 639,828 shares, does not have an expiration date.

Item 3. Defaults upon Senior Securities

  Not applicable.

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Item 4. Submission of Matters to a Vote of Security Holders

Non applicable

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
Exhibit 32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
Exhibit 32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

 

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FIRST DEFIANCE FINANCIAL CORP.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.

	First Defiance Financial Corp.
	(Registrant)
Date:  November 9, 2007	By:	/s/ William J. Small
		William J. Small
		Chairman, President and
		Chief Executive Officer
Date:  November 9, 2007	By:	/s/ John C. Wahl
		John C. Wahl
		Executive Vice President, Chief
		Financial Officer and
		Treasurer

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