ex99-1.htm

	Exhibit 99.1 NEWS RELEASE

	Contact:	William J. Small
		Chairman, President and CEO
		(419) 782-5015
		bsmall@first-fed.com

For Immediate Release

FIRST DEFIANCE ANNOUNCES 2008

FIRST QUARTER EARNINGS

DEFIANCE, OHIO (April 21, 2008) – First Defiance Financial Corp. (NASDAQ: FDEF) today announced that net income for its first quarter ended March 31, 2008 totaled $3.42 million, or $0.47 per diluted share, compared to $3.61 million or $0.50 per diluted share for the quarter ended March 31, 2007. The 2008 results included $750,000 of acquisition related charges associated with the March 14, 2008 acquisition of Pavilion Bancorp. of Adrian Michigan (“Pavilion”) and its subsidiary the Bank of Lenawee. Excluding the after tax impact of those charges, First Defiance had earnings of $3.91 million, or $0.54 per diluted share, for the quarter ended March 31, 2008. The 2008 quarterly results also included 17 days of operations of the eight banking centers acquired in the Pavilion acquisition.

First Defiance announced the agreement to acquire Pavilion on October 2, 2007. The purchase price was $37.50 cash plus 1.4209 shares of First Defiance stock for each share of Pavilion stock. The acquisition was valued at $55.2 million. Banking centers acquired include three in Adrian, two in Tecumseh and one each in Morenci, Hudson and Hillsdale, Michigan. At the closing date, Pavilion had $257.3 million in assets, $225.9 million in net loans and $208.3 million in deposits.

“We’re encouraged by the results of our 2008 first quarter, particularly the substantial improvement in our net interest margin in a very difficult rate environment,” said William J. Small, Chairman, President and Chief Executive Officer of First Defiance Financial Corp. “We also successfully completed the acquisition of Pavilion Bancorp. This was our largest acquisition yet and teams from throughout the combined organization worked extremely hard to make the transition as smooth as possible for our new customers.”

Net Interest Margin Increased by 24 Basis Points from 2007 Fourth Quarter

Net interest income increased to $13.6 million for the first three months of 2008, a 13.4% increase from the 2007 first quarter. Net interest margin improved to 3.76% for the 2008 first quarter, a 13 basis point improvement over last year’s first quarter margin of 3.63% and a 24 basis point improvement from the 2007 fourth quarter margin of 3.52%. Yield on interest earning assets declined by 45 basis points, to 6.77% from 7.22% in the 2007 first quarter while the cost of interest-bearing liabilities decreased by 59 basis points, to 3.37% from 3.96%. The margin also was favorably impacted by an increase in non-interest bearing deposits, which had an average balance of $124.6 million in the 2008 first quarter compared to $97.9 million in the same

Exhibit 99.1

period in 2007. The Pavilion acquisition had a favorable impact on the margin as Pavilion generally has historically operated at a higher margin than First Defiance. However, in the 2008 first quarter, the Pavilion results were included in only the last 17 of the 91 days.

“We reacted quickly to the Fed’s rate cuts in the first quarter because we knew the impact on our loan yields would be severe,” commented Mr. Small. “At the same time, we have been aggressively growing non-interest bearing deposit balances. As a result, we’ve improved the overall mix in our funding, which has been a long-term strategic goal.”

Provision for Loan Losses Increased, Credit Quality Impacted by Acquisition

The provision for loan losses more than doubled in the 2008 first quarter, to $1.1 million compared to $457,000 in the first quarter of 2007. The significant increase was due primarily to an increase in the loan loss reserve for one large impaired loan caused by a reduction in the appraised value of that loan’s real estate collateral. Excluding the specific allowance recorded for that one loan, the Company’s provision was very consistent with the level of provision expense recorded over the last several quarters.

“These are among the toughest credit times this industry has seen in my 30 years in the business,” said Mr. Small. “And although we’re not immune to these difficulties, I think our portfolio has held up well. While our non-performing assets increased to $16.9 million from $11.7 million at the end of December, $4.4 million in non-performing loans and $1.2 million in Other Real Estate Owned (OREO) came with the Pavilion acquisition. Non-performing loans originated by First Federal Bank actually decreased by $75,000 during the 2008 first quarter while OREO balances decreased by $246,000. Although we doubled our loan loss provision compared to last year’s first quarter, the impaired loan that caused most of the increase continues to pay as agreed, despite the weaknesses that caused us to consider the relationship impaired.”

“Net charge-offs of $491,000 for the quarter are higher than we like, but they represented only 0.15% of average loans outstanding calculated on an annual basis,” said Mr. Small. “Our expectation is that the ratio of net charge-offs to average assets will be higher for the balance of the year, both because of the acquisition and because of our market area’s overall economic condition. We’re seeing increases in delinquencies, and we are working harder to keep borrowers from falling past due. Our local economies remain generally healthy, though far from robust. The southern Michigan counties where our branches are located are probably struggling a little bit more than the communities where our Ohio branches are located, but it’s Well within the range of what we projected.”

“We are seeing a higher level of delinquencies in our mortgage and home equity portfolios than we are accustomed to,” added Mr. Small. “We likely will see an increase in charge-offs of this type of loan during the balance of 2008. While we don’t have subprime loans on our balance sheet, falling housing values in our market areas will have a negative impact on our asset quality. Overall however, I feel comfortable with our level of allowance for loan losses at March 31.”

Exhibit 99.1

Mortgage Banking, Insurance Sales Increases Highlight Non-Interest Income Growth

First Defiance’s non-interest income for the 2008 first quarter increased to $6.0 million from $5.6 million in the first quarter of 2007. Most of the increase was in mortgage banking income, which increased to $1.1 million in the 2008 first quarter from $782,000 in 2007. Gains from the sale of mortgage loans more than doubled to $1.1 million from $512,000 in the first quarter of 2007. Also, mortgage loan servicing revenue increased by $44,000 or 10.5% in the 2008 first quarter compared to 2007. The increases in gains and servicing revenue were partially offset by expense increases of $211,000 for the amortization of mortgage servicing rights and a $132,000 increase in expense associated with MSR valuation adjustments in the 2008 first quarter over the same period in 2007. The MSR valuation adjustment is a reflection of the declining fair value of certain sectors of the Company’s portfolio of mortgage servicing rights. The interest rate environment that gives rise to increased mortgage origination activity also typically causes increases in MSR amortization and impairment, creating a natural hedge in the mortgage banking line of business.

Income from the sale of insurance products increased to $1.9 million for the 2008 first quarter, from $1.7 million in the same period of 2007. The increase is attributable to a full quarter of revenue from the late February 2007 acquisition of the Huber Harger Welt and Smith Agency in Bowling Green, Ohio. First Defiance’s insurance subsidiary, First Insurance and Investments, typically recognizes contingent revenues during the first quarter. These revenues are bonuses paid by insurance carriers when the Company achieves certain loss ratios or growth targets. In 2008 First Insurance earned $784,000 of contingent income, compared to $754,000 recorded during the first quarter of 2007.

“We are pleased to report our third consecutive year of very strong contingent commissions at First Insurance,” continued Mr. Small. “This amount is a reflection of effective management of our relationships with our insurance companies. These contingent commissions are generally recorded on a cash basis when they are received in the first quarter.”

Non-Interest Expenses Up 14.5%, 8.1% Excluding Acquisition Charges

Total non-interest expense for First Defiance increased to $13.5 million for the quarter ended March 31, 2008, an increase of 14.5% from the $11.8 million of non-interest expense recognized in the 2007 first quarter. The 2008 amount includes $750,000 of acquisition related charges. If those costs are excluded, non-interest expense increased by 8.1%. Compensation and benefits increased by 8.7% between the 2007 and 2008 first quarters. The 2008 results included approximately $90,000 of compensation expense related to the 17 post-acquisition days of operating the former Bank of Lenawee offices. Compensation also increased because of year-over-year compensation increases, and a full three months of compensation associated with Huber Harger Welt and Smith, compared to just one month in 2007. Occupancy expense increased $266,000 because of the Pavilion and Huber Harger Welt and Smith acquisitions as well as the December 2007 opening of First Federal’s new operations center.

Acquisition related costs include the costs of terminating certain long-term contracts, stay bonuses, and other non-recurring costs associated with the completion of the acquisition and the transition of operations. Management had initially estimated that total acquisition related costs for the Pavilion acquisition would exceed $3.5 million. However, certain costs associated with

Exhibit 99.1

change in control agreements paid to former Pavilion officers were expensed by the seller prior to the closing date and the cost to terminate Bank of Lenawee’s participation in a multiple employer defined benefit pension plan will be approximately $900,000 less than initially anticipated. As a result of these changes, management believes that the balance of acquisition related costs, most of which will be incurred in the 2008 second quarter, will be between $1.0 million and $1.25 million.

Balance Sheet Amounts

As a result of the March 14 completion of the Pavilion acquisition, total assets at March 31, 2008 were $1.89 billion, compared to $1.61 billion at December 31, 2007. Net loans receivable (excluding loans held for sale) were $1.52 billion at March 31, 2008 compared to $1.28 billion at December 31, 2007. Total deposits at March 31, 2008 were $1.41 billion compared to $1.22 billion at December 31, 2007, which included non-interest bearing deposits at March 31, 2008 of $168.0 million compared to $121.6 million at December 31, 2007. Total stockholders’ equity increased to $194.8 million at March 31, 2008 compared to $166.0 million at the end of 2007, with the increase attributable to the 1,037,534 shares of First Defiance issued in the acquisition. Also at March 31, 2008, goodwill and other intangible assets totaled $67.2 million compared to $40.4 million at December 31, 2007. Many of the accounting adjustments recorded as of March 31, 2008 associated with the acquisition are preliminary and subject to adjustment as the accounting for the purchase price is further refined during the second quarter.

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, April 22, 2008 to discuss the earnings results and business trends. The conference call may be accessed by calling 800-860-2442.

Internet access to the call is also available (in listen-only mode) at the following Web address: http://www.talkpoint.com/viewer/starthere.asp?Pres=121308 (Due to URL length, please copy and paste into browser.)

The audio replay of the Internet Web cast will be available at www.fdef.com until Wednesday, April 30, 2008 at 9 a.m.

Annual Meeting of Shareholders

First Defiance Financial Corp. will host its Annual Meeting of Shareholders at 1:00 p.m. on Tuesday, April 22, 2008 at the First Federal Bank operations center at 25600 Elliott Road in Defiance. Following the meeting, the audio replay, slide presentation and transcript will be available at the Company’s Web site at www.fdef.com.

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 36 full service branches and 45 ATM locations in northwest Ohio, southeast Michigan and Fort Wayne, Indiana. First Insurance & Investments specializes in property and casualty and group health and life insurance, with offices in Defiance and Bowling Green, Ohio.

Exhibit 99.1

For more information, visit the company’s Web site at www.fdef.com.

-Financial Statements and Highlights Follow-

Safe Harbor Statement

This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell OREO properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission (SEC) filings, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. 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.	(Unaudited)

	March 31,			December 31,
(in thousands)	2008			2007

Assets
Cash and cash equivalents
Cash and amounts due from depository institutions	$	40,030		$	53,976
Interest-bearing deposits		1,548			11,577
		41,578			65,553
Securities
Available-for sale, carried at fair value		123,566			112,370
Held-to-maturity, carried at amortized cost		1,081			1,117
		124,647			113,487

Loans		1,535,354			1,289,696
Allowance for loan losses		(18,556	)		(13,890	)
Loans, net		1,516,798			1,275,806
Loans held for sale		7,400			5,751
Mortgage servicing rights		9,074			5,973
Accrued interest receivable		8,636			6,755
Federal Home Loan Bank stock		20,864			18,586
Bank Owned Life Insurance		28,696			28,423
Office properties and equipment		50,070			40,545
Real estate and other assets held for sale		3,448			2,460
Goodwill		57,315			36,820
Core deposit and other intangibles		9,915			3,551
Other assets		7,606			5,694
Total Assets	$	1,886,047		$	1,609,404

Liabilities and Stockholders’ Equity
Non-interest-bearing deposits	$	168,049		$	121,563
Interest-bearing deposits		1,245,652			1,096,295
Total deposits		1,413,701			1,217,858
Advances from Federal Home Loan Bank		163,966			139,536
Notes payable and other interest-bearing liabilities		51,361			30,055
Subordinated debentures		36,083			36,083
Advance payments by borrowers for tax and insurance		594			762
Deferred taxes		5,654			1,306
Other liabilities		19,908			17,850
Total liabilities		1,691,267			1,443,450
Stockholders’ Equity
Preferred stock		-			-
Common stock, net		127			117
Additional paid-in-capital		140,176			112,651
Stock acquired by ESOP		-			(202	)
Accumulated other comprehensive loss		(746	)		(415	)
Retained earnings		127,923			126,630
Treasury stock, at cost		(72,700	)		(72,827	)
Total stockholders’ equity		194,780			165,954
Total liabilities and stockholders’ equity	$	1,886,047		$	1,609,404


Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2008			2007
Interest Income:
Loans	$	22,812		$	22,298
Investment securities		1,485			1,432
Interest-bearing deposits		99			11
FHLB stock dividends		243			292
Total interest income		24,639			24,033
Interest Expense:
Deposits		8,670			9,540
FHLB advances and other		1,655			2,003
Subordinated debentures		529			337
Notes Payable		194			169
Total interest expense		11,048			12,049
Net interest income		13,591			11,984
Provision for loan losses		1,058			457
Net interest income after provision for loan losses		12,533			11,527
Non-interest Income:
Service fees and other charges		2,623			2,518
Mortgage banking income		1,114			782
Gain on sale of non-mortgage loans		35			5
Loss on securities		(81	)		-
Insurance and investment sales commissions		1,936			1,703
Trust income		111			86
Income from Bank Owned Life Insurance		273			294
Other non-interest income		4			219
Total Non-interest Income		6,015			5,607
Non-interest Expense:
Compensation and benefits		7,124			6,552
Occupancy		1,669			1,403
State franchise tax		494			363
Acquisition related charges		750			-
Data processing		1,029			953
Amortization of intangibles		191			143
Other non-interest expense		2,219			2,357
Total Non-interest Expense		13,476			11,771
Income before income taxes		5,072			5,363
Income taxes		1,653			1,757
Net Income	$	3,419			3,606

Earnings per share:
Basic	$	0.48		$	0.51
Diluted	$	0.47		$	0.50

Core operating earnings per share*:
Basic	$	0.54		$	0.51
Diluted	$	0.54		$	0.50

Average Shares Outstanding:
Basic		7,195			7,119
Diluted		7,241			7,229

* - See Non-GAAP Disclosure Reconciliations


Financial Summary and Comparison
First Defiance Financial Corp.	(Unaudited)
	Three Months Ended
	March 31,
(dollars in thousands, except per share data)	2008			2007			% change
Summary of Operations

Tax-equivalent interest income (1)		24,843			24,207			2.6
Interest expense		11,048			12,049			(8.3	)
Tax-equivalent net interest income (1)		13,795			12,158			13.5
Provision for loan losses		1,058			457			131.5
Tax-equivalent NII after provision for loan loss (1)		12,737			11,701			8.9
Securities losses		(81	)		-		NM
Non-interest income-excluding securities losses		6,096			5,607			8.7
Non-interest expense		13,476			11,771			14.5
Non-interest expense-excluding non-core charges		12,726			11,771			8.1
One time acquisition related charges		750			-		NM
Income taxes		1,653			1,757			(5.9	)
Net Income		3,419			3,606			(5.2	)
Core operating earnings (2)		3,906			3,606			8.3
Tax equivalent adjustment (1)		204			174			17.2
At Period End
Assets		1,886,047			1,518,414			24.2
Earning assets		1,689,813			1,372,475			23.1
Loans		1,535,354			1,237,072			24.1
Allowance for loan losses		18,556			13,752			34.9
Deposits		1,413,701			1,146,319			23.3
Stockholders’ equity		194,780			164,540			18.4
Average Balances
Assets		1,645,436			1,510,176			9.0
Earning assets		1,475,882			1,358,948			8.6
Deposits and interest-bearing liabilities		1,445,113			1,332,005			8.5
Loans		1,326,468			1,226,240			8.2
Deposits		1,236,354			1,128,765			9.5
Stockholders’ equity		171,693			161,128			6.6
Stockholders’ equity / assets		10.43	%		10.67	%		(2.2	)
Per Common Share Data
Net Income
Basic	$	0.48		$	0.51			(5.9	)
Diluted		0.47			0.50			(6.0	)
Core operating earnings (2)
Basic	$	0.54		$	0.51			7.2
Diluted	$	0.54		$	0.50			8.1
Dividends		0.26			0.25			4.0
Market Value:
High	$	22.51		$	30.25			(25.6	)
Low		17.30			27.25			(36.5	)
Close		18.35			28.70			(36.1	)
Book Value		24.01			22.77			5.4
Tangible Book Value		15.72			17.16			(8.4	)
Shares outstanding, end of period (000)		8,114			7,227			12.3
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.76	%		3.63	%		3.7
Return on average assets -GAAP		0.84	%		0.97	%		(13.8	)
Return on average assets -Core Operating		0.95	%		0.97	%		(1.6	)
Return on average equity- GAAP		8.01	%		9.08	%		(11.8	)
Return on average equity- Core Operating		9.15	%		9.08	%		0.8
Efficiency ratio (3) -GAAP		67.75	%		66.26	%		2.2
Efficiency ratio (3) -Core Operating		63.98	%		66.26	%		(3.4	)
Effective tax rate		32.59	%		32.76	%		(0.5	)
Dividend payout ratio (basic)		54.17	%		49.02	%		10.5

(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) Core operating earnings = Net income plus after tax effect of acquisition related and other one-time charges. See Non-GAAP Disclosure Reconciliation.

(3) Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains or losses, net and asset sales gains, net.

NM Percentage change not meaningful

Non-GAAP Disclosure Reconciliations
First Defiance Financial Corp.

Management believes that the presentation of the non-GAAP financial measures in this release assists investors when comparing results period-to-period in a more meaningful and consistent manner and provides a better measure of results for First Defiance's ongoing operations. Core operating earnings are net income adjusted to exclude discontinued operations, merger, integration and restructuring expenses and the results of certain significant transactions not representative of ongoing operations.

	Three months ended
Core Operating Earnings	March 31,
(dollars in thousands, except per share data)	2008			2007
Net Income	$	3,419		$	3,606

Acquisition related charges		750			-
Tax effect		(263	)		-
After-tax non-operating items		487			-
Core operating earnings	$	3,906		$	3,606

Acquisition related charges in 2008 reflect charges associated with the acquisition of Pavilion Bancorp.

Core Operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, non-operating items are deducted from non-interest expense in the numerator and non-interest income in the denominator of the core operating efficiency ratio disclosed in the tables. Comparable information on a GAAP basis is also provided in the tables.

Income from Mortgage Banking

Revenue from sales and servicing of mortgage loans consisted of the following:

	Three months ended
	March 31,
(dollars in thousands)	2008			2007

Gain from sale of mortgage loans	$	1,143		$	512
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		465			421
Amortization of mortgage servicing rights		(352	)		(141	)
Mortgage servicing rights valuation adjustments		(142	)		(10	)
		(29	)		270
Total revenue from sale and servicing of mortgage loans	$	1,114		$	782



Yield Analysis
First Defiance Financial Corp.
	Three Months Ended March 31,
	2008							2007
	Average				Yield			Average				Yield
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,326,468	$	22,826		6.92	%	$	1,226,240	$	22,308		7.38	%
Securities		116,717		1,675		5.80	%		112,999		1,596		5.72	%
Interest Bearing Deposits		14,087		99		2.83	%		1,124		11		3.97	%
FHLB stock		18,610		243		5.25	%		18,585		292		6.37	%
Total interest-earning assets		1,475,882		24,843		6.77	%		1,358,948		24,207		7.22	%
Non-interest-earning assets		169,554							151,228
Total assets	$	1,645,436						$	1,510,176
Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	1,111,711	$	8,670		3.14	%	$	1,030,831	$	9,540		3.75	%
FHLB advances and other		146,520		1,655		4.54	%		159,840		2,003		5.08	%
Other Borrowings		25,958		194		3.01	%		22,501		169		3.05	%
Subordinated debentures		36,281		529		5.86	%		20,899		337		6.54	%
Total interest-bearing liabilities		1,320,470		11,048		3.37	%		1,234,071		12,049		3.96	%
Non-interest bearing deposits		124,643		-		-			97,934		-		-
Total including non-interest-bearing demand deposits		1,445,113		11,048		3.07	%		1,332,005		12,049		3.67	%
Other non-interest-bearing liabilities		28,630							17,043
Total liabilities		1,473,743							1,349,048
Stockholders' equity		171,693							161,128
Total liabilities and stockholders' equity	$	1,645,436						$	1,510,176
Net interest income; interest rate spread			$	13,795		3.40	%			$	12,158		3.26	%
Net interest margin (3)						3.76	%						3.63	%
Average interest-earning assets to average interest bearing liabilities						112	%						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.


Selected Quarterly Information
First Defiance Financial Corp.

(dollars in thousands, except per share data)	1st Qtr 2008			4th Qtr 2007			3rd Qtr 2007			2nd Qtr 2007			1st Qtr 2007
Summary of Operations
Tax-equivalent interest income (1)	$	24,843		$	25,383		$	25,177		$	24,709		$	24,207
Interest expense		11,048			12,669			12,962			12,410			12,049
Tax-equivalent net interest income (1)		13,795			12,714			12,215			12,299			12,158
Provision for loan losses		1,058			603			671			575			457
Tax-equivalent NII after provision for loan losses (1)		12,737			12,111			11,544			11,724			11,701
Investment securities gains		(81	)		-			21			-			-
Non-interest income (excluding securities gains/losses)		6,096			5,268			5,563			5,670			5,607
Non-interest expense		13,476			12,161			12,296			11,882			11,771
Acquisition and other on-time charges		750			-			-			-			-
Income taxes		1,653			1,474			1,515			1,724			1,757
Net income		3,419			3,558			3,129			3,611			3,606
Core operating earnings (2)		3,906			3,558			3,129			3,611			3,606
Tax equivalent adjustment (1)		204			186			188			177			174
At Period End
Total assets	$	1,886,047		$	1,609,404		$	1,579,946		$	1,540,675		$	1,518,414
Earning assets		1,689,813			1,439,097			1,432,735			1,385,803			1,372,475
Loans		1,535,354			1,289,696			1,264,872			1,245,027			1,237,072
Allowance for loan losses		18,556			13,890			13,427			13,417			13,752
Deposits		1,413,701			1,217,858			1,208,164			1,167,198			1,146,319
Stockholders’ equity		194,780			165,954			164,706			164,657			164,540
Stockholders’ equity / assets		10.33	%		10.31	%		10.42	%		10.69	%		10.84	%
Goodwill		57,315			36,820			36,515			36,551			36,464
Average Balances
Total assets	$	1,645,436		$	1,589,264		$	1,550,174		$	1,527,863		$	1,510,176
Earning assets		1,475,882			1,432,061			1,397,521			1,376,030			1,358,948
Deposits and interest-bearing liabilities		1,445,113			1,404,065			1,367,421			1,344,186			1,332,005
Loans		1,326,468			1,265,307			1,244,531			1,231,192			1,226,240
Deposits		1,236,354			1,212,486			1,177,594			1,157,793			1,128,765
Stockholders’ equity		171,693			165,762			164,751			164,591			161,128
Stockholders’ equity / assets		10.43	%		10.43	%		10.63	%		10.77	%		10.67	%
Per Common Share Data
Net Income:
Basic	$	0.48		$	0.51		$	0.44		$	0.51		$	0.51
Diluted		0.47			0.50			0.44			0.50			0.50
Core operating earnings (2)
Basic		0.54			0.51			0.44			0.51			0.51
Diluted		0.54			0.50			0.44			0.50			0.50
Dividends		0.26			0.26			0.25			0.25			0.25
Market Value:
High	$	22.51		$	26.93		$	29.64		$	30.00		$	30.25
Low		17.30			20.58			23.99			26.71			27.25
Close		18.35			22.02			27.00			29.82			28.70
Book Value		24.01			23.51			23.21			22.94			22.77
Shares outstanding, end of period (in thousands)		8,114			7,059			7,095			7,178			7,227
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.76	%		3.52	%		3.47	%		3.58	%		3.63	%
Return on average assets -GAAP		0.84	%		0.89	%		0.80	%		0.95	%		0.97	%
Return on average assets -Core Operating		0.95	%		0.89	%		0.80	%		0.95	%		0.97	%
Return on average equity- GAAP		8.01	%		8.52	%		7.53	%		8.80	%		9.08	%
Return on average equity- Core Operating		9.15	%		8.52	%		7.53	%		8.80	%		9.08	%
Efficiency ratio (3) -GAAP		67.75	%		67.63	%		69.16	%		66.12	%		66.26	%
Efficiency ratio (3) -Core Operating		63.98	%		67.63	%		69.16	%		66.12	%		66.26	%
Effective tax rate		32.59	%		29.29	%		32.62	%		32.31	%		32.76	%
Dividend payout ratio (basic)		54.17	%		50.98	%		56.82	%		49.02	%		49.02	%

(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) See Non-GAAP Disclusure Reconciliation
(3) Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains, net and asset sales gains, net.


Selected Quarterly Information
First Defiance Financial Corp.

(dollars in thousands, except per share data)	1st Qtr 2008			4th Qtr 2007			3rd Qtr 2007			2nd Qtr 2007			1st Qtr 2007
Loan Portfolio Composition
One to four family residential real estate	$	265,413		$	231,921		$	230,075		$	234,819		$	243,632
Construction		17,328			13,146			15,392			16,346			14,277
Commercial real estate		733,476			601,851			592,914			583,046			579,463
Commercial		332,772			283,072			267,897			255,022			242,543
Consumer finance		41,209			37,743			38,280			40,693			40,857
Home equity and improvement		151,563			128,080			127,641			123,936			123,404
Total loans		1,541,761			1,295,813			1,272,199			1,253,862			1,244,176
Less:
Loans in process		5,363			5,085			6,301			7,761			6,012
Deferred loan origination fees		1,044			1,032			1,026			1,074			1,092
Allowance for loan loss		18,556			13,890			13,427			13,417			13,752
Net Loans	$	1,516,798		$	1,275,806		$	1,251,445		$	1,231,610		$	1,223,320

Allowance for loan loss activity
Beginning allowance	$	13,890		$	13,427		$	13,417		$	13,752		$	13,579
Provision for loan losses		1,058			603			671			575			457
Reserve from acquisitions		4,099			-			-			-			-
Credit loss charge-offs:
One to four family residential real estate		57			33			128			10			85
Commercial real estate		464			135			586			936			146
Commercial		-			7			-			11			81
Consumer finance		27			42			25			23			71
Home equity and improvement		72			30			10			41			-
Total charge-offs		620			247			749			1,021			383
Total recoveries		129			107			88			111			99
Net charge-offs (recoveries)		491			140			661			910			284
Ending allowance	$	18,556		$	13,890		$	13,427		$	13,417		$	13,752

Credit Quality
Non-accrual loans	$	13,497		$	9,217		$	8,523		$	6,427		$	8,211
Loans over 90 days past due and still accruing		-			-			-			-			-
Total non-performing loans (1)		13,497			9,217			8,523			6,427			8,211
Real estate owned (REO)		3,448			2,460			3,392			3,324			2,581
Total non-performing assets (1)	$	16,945		$	11,677		$	11,915		$	9,751		$	10,792
Net charge-offs		491			140			661			910			284

Allowance for loan losses / loans		1.21	%		1.08	%		1.06	%		1.08	%		1.11	%
Allowance for loan losses / non-performing assets		109.51	%		118.95	%		112.69	%		137.60	%		127.43	%
Allowance for loan losses / non-performing loans		137.48	%		150.70	%		157.54	%		208.76	%		167.48	%
Non-performing assets / loans plus REO		1.10	%		0.90	%		0.94	%		0.78	%		0.87	%
Non-performing assets / total assets		0.90	%		0.73	%		0.75	%		0.63	%		0.71	%
Net charge-offs / average loans (annualized)		0.15	%		0.04	%		0.21	%		0.30	%		0.09	%

Deposit Balances
Non-interest-bearing demand deposits	$	168,049		$	121,563		$	109,128		$	107,111		$	101,089
Interest-bearing demand deposits and money market		408,979			342,367			330,168			314,923			313,327
Savings deposits		144,184			105,873			98,719			97,004			88,345
Retail time deposits less than $100,000		529,990			509,720			524,347			504,301			498,136
Retail time deposits greater than $100,000		162,400			137,927			142,645			136,319			136,248
National/Brokered time deposits		99			408			3,157			7,540			9,174
Total deposits	$	1,413,701		$	1,217,858		$	1,208,164		$	1,167,198		$	1,146,319

(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.