10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the Quarterly Period Ended March 31, 2014

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 of 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 x    No  ¨

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ¨	Accelerated filer    x
Non-accelerated filer      ¨	Smaller reporting company      ¨

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

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 – 9,665,100 shares outstanding at April 30, 2014.

FIRST DEFIANCE FINANCIAL CORP.

INDEX

		Page Number
PART I.-FINANCIAL INFORMATION
Item 1.	Consolidated Condensed Financial Statements (Unaudited):
	Consolidated Condensed Statements of Financial Condition – March 31, 2014 and December 31, 2013	2
	Consolidated Condensed Statements of Income - Three months ended March 31, 2014 and 2013	4
	Consolidated Condensed Statements of Comprehensive Income – Three months ended March 31, 2014 and 2013	5
	Consolidated Condensed Statements of Changes in Stockholders’ Equity – Three months ended March 31, 2014 and 2013	6
	Consolidated Condensed Statements of Cash Flows - Three months ended March 31, 2014 and 2013	7
	Notes to Consolidated Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	64
Item 4.	Controls and Procedures	65
PART II-OTHER INFORMATION:
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
	Signatures	68

1

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

(Amounts in Thousands, except share and per share data)

	March 31, 2014		December 31, 2013
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	42,183	$	36,318
Federal funds sold		169,000		143,000
		211,183		179,318
Securities:
Available-for-sale, carried at fair value		209,321		198,170
Held-to-maturity, carried at amortized cost (fair value $383 and $393 at March 31, 2014 and December 31, 2013, respectively)		378		387
		209,699		198,557
Loans held for sale		8,771		9,120
Loans receivable, net of allowance of $24,783 at March 31, 2014 and $24,950 at December 31, 2013, respectively		1,539,170		1,555,498
Accrued interest receivable		6,122		5,778
Federal Home Loan Bank stock		13,802		19,350
Bank owned life insurance		46,934		42,715
Premises and equipment		38,379		38,597
Real estate and other assets held for sale		6,028		5,859
Goodwill		61,525		61,525
Core deposit and other intangibles		3,208		3,497
Mortgage servicing rights		9,014		9,106
Deferred taxes		92		565
Other assets		9,732		7,663
Total assets	$	2,163,659	$	2,137,148

(continued)

2

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

(Amounts in Thousands, except share and per share data)

	March 31, 2014			December 31, 2013
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	1,760,617		$	1,735,792
Advances from the Federal Home Loan Bank		22,278			22,520
Subordinated debentures		36,083			36,083
Securities sold under repurchase agreements		48,939			51,919
Advance payments by borrowers		1,209			1,519
Other liabilities		19,656			17,168
Total liabilities		1,888,782			1,865,001
Stockholders’ equity:
Preferred stock, $.01 par value per share: 4,963,000 shares authorized; no shares issued		–			–
Common stock, $.01 par value per share: 25,000,000 shares authorized; 12,735,313 and 12,735,313  shares issued and 9,652,966 and 9,719,521 shares outstanding, respectively		127			127
Common stock warrant		878			878
Additional paid-in capital		136,142			136,403
Accumulated other comprehensive income, net of tax of $897 and $294, respectively		1,665			545
Retained earnings		186,001			182,290
Treasury stock, at cost, 3,082,347 and 3,015,792 shares respectively		(49,936	)		(48,096	)
Total stockholders’ equity		274,877			272,147
Total liabilities and stockholders’ equity	$	2,163,659		$	2,137,148

See accompanying notes

3

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Income

(UNAUDITED)

(Amounts in Thousands, except share and per share data)

	Three Months Ended
	March 31,
	2014		2013
Interest Income
Loans	$	16,651	$	16,796
Investment securities:
Taxable		775		678
Non-taxable		752		725
Interest-bearing deposits		101		58
FHLB stock dividends		195		219
Total interest income		18,474		18,476
Interest Expense
Deposits		1,358		1,647
FHLB advances and other		133		90
Subordinated debentures		146		152
Securities sold under repurchase agreements		41		60
Total interest expense		1,678		1,949
Net interest income		16,796		16,527
Provision for loan losses		103		425
Net interest income after provision for loan losses		16,693		16,102
Non-interest Income
Service fees and other charges		2,324		2,385
Insurance commission income		3,030		3,036
Mortgage banking income		1,247		2,830
Gain on sale of non-mortgage loans		3		15
Gain on sale or call of securities		-		53
Trust income		278		206
Income from Bank Owned Life Insurance		219		229
Other non-interest income		225		251
Total non-interest income		7,326		9,005
Non-interest Expense
Compensation and benefits		8,472		8,798
Occupancy		1,588		1,632
FDIC insurance premium		385		656
State franchise tax		495		629
Data processing		1,365		1,181
Amortization of intangibles		289		336
Other non-interest expense		4,067		4,010
Total non-interest expense		16,661		17,242
Income before income taxes		7,358		7,865
Federal income taxes		2,179		2,306
Net Income	$	5,179	$	5,559
Earnings per common share (Note 6)
Basic	$	0.53	$	0.57
Diluted	$	0.51	$	0.55
Dividends declared per share (Note 5)	$	0.15	$	0.10
Average common shares outstanding (Note 6)
Basic		9,681		9,736
Diluted		10,108		10,105

See accompanying notes

4

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Comprehensive Income

(UNAUDITED)

(Amounts in Thousands)

	Three Months Ended March 31,
	2014			2013
Net income	$	5,179		$	5,559
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale		1,723			(664	)
Reclassification adjustment for security gains included in net income(1)		-			(53	)
Income tax benefit (expense)		(603	)		251
Other comprehensive income (loss)		1,120			(466	)
Comprehensive income	$	6,299		$	5,093

(1) Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended March 31, 2014 and 2013 was $0 and $13, respectively.

5

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Statement of Changes in Stockholders’ Equity

(Amounts in Thousands, except number of shares)

										Accumulated
					Common		Additional			Other									Total
	Preferred		Common		Stock		Paid-In			Comprehensive			Retained			Treasury			Stockholder’s
	Stock		Stock		Warrant		Capital			Income (Loss)			Earnings			Stock			Equity
Balance at January 1, 2014	$	-	$	127	$	878	$	136,403		$	545		$	182,290		$	(48,096	)	$	272,147
Net income														5,179						5,179
Other comprehensive income											1,120									1,120
Stock option expense								20												20
7,050 shares issued under stock option plan, with $17 income tax benefit, net of repurchases								(11	)					(19	)		106			76
Restricted share activity under stock incentive Plans, including 5,767 shares issued								(270	)								93			(177	)
78,972 shares repurchased																	(2,039	)		(2,039	)
Common stock dividends declared														(1,449	)					(1,449	)
Balance at March 31, 2014	$	-	$	127	$	878	$	136,142		$	1,665		$	186,001		$	(49,936	)	$	274,877
Balance at January 1, 2013	$	-	$	127	$	878	$	136,046		$	4,274		$	164,103		$	(47,300	)	$	258,128
Net income														5,559						5,559
Other comprehensive loss											(466	)								(466	)
Stock option expense								19												19
4,870 shares issued under stock option plan, with no income tax benefit, net of repurchases								(9	)					(81	)		142			52
Restricted share activity under stock incentive Plans, including 31,796 shares issued								(131	)					(45	)		500			324
Common stock dividends declared														(973	)					(973	)
Balance at March 31, 2013	$	-	$	127	$	878	$	135,925		$	3,808		$	168,563		$	(46,658	)	$	262,643

6

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(UNAUDITED)

(Amounts in Thousands)

	Three Months Ended
	March 31,
	2014			2013
Operating Activities
Net income	$	5,179		$	5,559
Items not requiring (providing) cash
Provision for loan losses		103			425
Depreciation		725			809
Amortization of mortgage servicing rights, net of impairment recoveries		299			216
Amortization of core deposit and other intangible assets		289			336
Net amortization of premiums and discounts on loans and deposits		160			199
Amortization of premiums and discounts on securities		93			129
Change in deferred taxes		(129	)		27
Proceeds from the sale of loans held for sale		27,698			112,112
Originations of loans held for sale		(28,093	)		(99,395	)
Gain from sale of loans		(644	)		(2,191	)
Loss from sale of property and equipment		-			1
Gain from sale or call of securities		-			(53	)
Loss on sale or write-down of real estate and other assets held for sale		(38	)		17
Stock option expense		20			19
Restricted stock expense (credit)		(177	)		324
Income from bank owned life insurance		(219	)		(229	)
Changes in:
Accrued interest receivable		(344	)		(431	)
Other assets		(2,069	)		(383	)
Other liabilities		2,489			(1,854	)
Net cash provided by operating activities		5,342			15,637
Investing Activities
Proceeds from maturities of held-to-maturity securities		8			16
Proceeds from maturities, calls and pay-downs of available-for-sale securities		5,496			13,805
Proceeds from sale of real estate and other assets held for sale		496			785
Proceeds from the sale of available-for-sale securities		1,654			1,019
Proceeds from sale of non-mortgage loans		8,679			3,629
Purchases of available-for-sale securities		(16,672	)		(17,647	)
Purchase of bank owned life insurance		(4,000	)		-
Purchase of portfolio mortgage loans		(5,118	)		-
Proceeds from Federal Home Loan stock redemption		5,548			1,301
Purchases of premises and equipment, net		(507	)		(365	)
Net decrease in loans receivable		13,058			12,447
Net cash provided by  investing activities		8,642			14,990
Financing Activities
Net (decrease) increase in deposits and advance payments by borrowers		24,515			(11,229	)
Repayment of Federal Home Loan Bank advances		(242	)		(12	)
Increase (decrease) in securities sold under repurchase agreements		(2,980	)		1,045
Proceeds from exercise of stock options		76			52
Net cash paid for repurchase of common stock		(2,039	)		-
Cash dividends paid on common stock		(1,449	)		(973	)
Net cash provided by (used in) financing activities		17,881			(11,117	)
Increase in cash and cash equivalents		31,865			19,510
Cash and cash equivalents at beginning of period		179,318			136,832
Cash and cash equivalents at end of period	$	211,183		$	156,342
Supplemental cash flow information:
Interest paid	$	1,662		$	1,923
Income taxes paid	$	-		$	3,100
Transfers from loans to real estate and other assets held for sale	$	627		$	1,310

See accompanying notes.

7

FIRST DEFIANCE FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements

(Unaudited at March 31, 2014 and 2013)

1. Basis of Presentation

First Defiance Financial Corp. (“First Defiance” or the “Company”) is a unitary thrift holding company that, through its subsidiaries, First Federal Bank of the Midwest (“First Federal”), First Insurance Group of the Midwest, Inc. (“First Insurance”), and First Defiance Risk Management Inc. (collectively, the Subsidiaries”), focuses on traditional banking and property and casualty, life and group health insurance products. All significant intercompany transactions and balances are eliminated in consolidation.

First Federal is primarily engaged in community banking attracting deposits from the general public and using those and other available sources of funds to originate loans primarily in the counties in which its offices are located. First Federal’s traditional banking activities include originating and servicing residential, non-residential real estate, commercial, home improvement and home equity and consumer loans and providing a broad range of depository, trust and wealth management services. First Insurance is an insurance agency that does business in the Defiance, Bryan, Bowling Green, Maumee and Oregon, Ohio areas, offering property and casualty, group health insurance and life insurance products.First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company to insure the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

The consolidated condensed statement of financial condition at December 31, 2013 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 March 31, 2014 and for the three month periods ended March 31, 2014 and 2013 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 2013 Annual Report on Form 10-K for the year ended December 31, 2013. 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 month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the entire year.

8

2. Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant areas where First Defiance uses estimates are the valuation of certain investment securities, the determination of the allowance for loan losses, the valuation of mortgage servicing rights and goodwill, the determination of unrecognized income tax benefits, and the fair value of financial instruments.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for the calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options, warrants, restricted stock awards and stock grants.

Newly Issued but Not Yet Effective Accounting Standards

In January 2014, the FASB issued ASU 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of the amendments in ASU 2014-04 to Topic 310, “Receivables - Troubled Debt Restructurings by Creditors,” is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. An entity can elect to adopt the amendments using either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

9

3. Fair Value

FASB ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

FASB ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on the best information available. In that regard, FASB ASC Topic 820 established a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

· Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

· Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by a correlation or other means.

· Level 3: Unobservable inputs for determining fair value of assets and liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

10

Available for sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 1 include federal agency preferred stock securities. Securities in Level 2 include U.S. Government agencies, mortgage-backed securities, corporate bonds and municipal securities. The Company classifies its pooled trust preferred collateralized debt obligations as Level 1 and Level 3. The portfolio consists of collateralized debt obligations backed by pools of trust preferred securities issued by financial institutions and insurance companies. The two collateralized debt obligations, which are backed by financial institutions, are allowed under the Volcker Rule and classified as Level 3 based on the lack of observable market data, the Company estimated fair values based on the observable data available and reasonable unobservable market data. The Company estimated fair value based on a discounted cash flow model, which used appropriately adjusted discount rates reflecting credit and liquidity risks. The Company used an independent third party, which is described further in Note 7.

Impaired loans - Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure.  Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value on the cost to replace the current property.  Value of market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investors required return.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell.  Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Real Estate held for sale - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are then reviewed monthly by members of the asset review committee for valuation changes and are accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal.  Appraisal values are discounted from 0% to 20% to account for other factors that may impact the value of collateral. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include:  physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

11

Mortgage servicing rights – On a quarterly basis, mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level based on a model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and are validated against available market data (Level 2).

Mortgage banking derivative - The fair value of mortgage banking derivatives are evaluated monthly based on derivative valuation models using quoted prices for similar assets adjusted for specific attributes of the commitments and other observable market data at the valuation date (Level 2).

The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Recurring Basis

March 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	4,945	$	-	$	4,945
Mortgage-backed - residential		-		42,294		-		42,294
REMICs		-		1,985		-		1,985
Collateralized mortgage obligations		-		67,775		-		67,775
Trust preferred stock		-		-		704		704
Preferred stock		880		-		-		880
Corporate bonds		-		6,961		-		6,961
Obligations of state and political subdivisions		-		83,777		-		83,777
Mortgage banking derivative - asset		-		345		-		345
Mortgage banking derivative - liability		-		-		-		-

12

December 31, 2013	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	-	$	4,921	$	-	$	4,921
Mortgage-backed - residential		-		41,292		-		41,292
Collateralized mortgage obligations		-		59,841		-		59,841
Trust preferred stock		1,654		-		582		2,236
Preferred stock		718		-		-		718
Corporate bonds		-		8,942		-		8,942
Obligations of state and political subdivisions		-		80,220				80,220
Mortgage banking derivative - asset		-		295		-		295
Mortgage banking derivative - liability		-		-		-		-

The table below presents a reconciliation and income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2014 and March 31, 2013:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2014	$	582
Total gains or losses (realized/unrealized)
Included in earnings (unrealized)		-
Included in other comprehensive income (presented gross of taxes)		122
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, March 31, 2014	$	704

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2013	$	1,474
Total gains or losses (realized/unrealized)
Included in earnings (unrealized)		-
Included in other comprehensive income (presented gross of taxes)		177
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, March 31, 2013	$	1,651

13

The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Non-Recurring Basis

March 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	436	$	436
Multi Family Residential		-		-		320		320
Commercial Real Estate		-		-		7,561		7,561
Commercial loans		-		-		1,800		1,800
Total Impaired loans		-		-		10,117		10,117
Mortgage servicing rights		-		1,255		-		1,255

December 31, 2013	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	259	$	259
Multi Family Residential		-		-		338		338
Commercial Real Estate		-		-		9,590		9,590
Home Equity and Improvement		-		-		531		531
Total impaired loans		-		-		10,718		10,718
Mortgage servicing rights		-		1,370		-		1,370
Real estate held for sale
Residential		-		-		112		112
CRE		-		-		1,278		1,278
Total Real Estate held for sale		-		-		1,390		1,390

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For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of March 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
	(Dollars in Thousands)
Trust preferred stock	$	704	Discounted cash flow	Constant prepayment rate		40	%		40	%
				Expected asset default		0-30	%		15	%
				Expected recoveries		10-15	%		10	%
Impaired Loans- Applies to all loan classes	$	10,117	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		0-10	%		10	%

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
	(Dollars in Thousands)
Trust preferred stock	$	582	Discounted cash flow	Constant prepayment rate		40	%		40	%
				Expected asset default		0-30	%		15	%
				Expected recoveries		10-15	%		10	%
Impaired Loans- Applies to all loan classes	$	10,718	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		0-10	%		10	%
Real estate held for sale – Applies to all classes	$	1,390	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		0-20	%		20	%

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a fair value of $10.1 million, with no valuation allowance and a fair value of $10.7 million, with no valuation allowance at March 31, 2014 and December 31, 2013, respectively. A provision expense of $756,000 and $621,000 for the three months ended March 31, 2014 and March 31, 2013, respectively, was included in earnings.

Mortgage servicing rights which are carried at the lower of cost or fair value had a fair value of $1.3 million with a valuation allowance of $1.0 million and a fair value of $1.4 million with a valuation allowance of $1.0 million at March 31, 2014 and December 31, 2013, respectively. A charge of $7,000 and a recovery of $473,000 for the three months ended March 31, 2014 and March 31, 2013, respectively, were included in earnings.

15

In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of March 31, 2014 and December 31, 2013. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of First Defiance.

Much of the information used to arrive at “fair value” is highly subjective and judgmental in nature and therefore the results may not be precise. Subjective factors include, among other things, estimated cash flows, risk characteristics and interest rates, all of which are subject to change. With the exception of investment securities, the Company’s financial instruments are not readily marketable and market prices do not exist. Since negotiated prices for the instruments, which are not readily marketable depend greatly on the motivation of the buyer and seller, the amounts that will actually be realized or paid per settlement or maturity of these instruments could be significantly different.

The carrying amount of cash and cash equivalents, term notes payable and advance payments by borrowers for taxes and insurance, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

It was not practicable to determine the fair value of Federal Home Loan Bank (“FHLB”) stock due to restrictions placed on its transferability.

The fair value of loans that reprice within 90 days is equal to their carrying amount. For other loans, the estimated fair value is calculated based on discounted cash flow analysis, using interest rates currently being offered for loans with similar terms, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost of fair value as previously described. The allowance for loan losses is considered to be a reasonable adjustment for credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based on binding contracts and quotes from third party investors resulting in a Level 2 classification.

The fair value of accrued interest receivable is equal to the carrying amounts resulting in a Level 2 or Level 3 classification which is consistent with its underlying value.

The fair value of non-interest bearing deposits are considered equal to the amount payable on demand at the reporting date (i.e. carrying value) and are classified as Level 1. The fair value of savings, NOW and certain money market accounts are equal to their carrying amounts and are a Level 2 classification. Fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

The fair values of securities sold under repurchase agreements are equal to their carrying amounts resulting in a Level 2 classification. The carrying value of subordinated debentures and deposits with fixed maturities is estimated based discounted cash flow analyses based on interest rates currently being offered on instruments with similar characteristics and maturities resulting in a Level 3 classification.

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FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at March 31, 2014.

			Fair Value Measurements at March 31, 2014 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	211,183	$	211,183	$	211,183	$	-	$	-
Investment securities		209,699		209,704		880		208,120		704
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,547,941		1,553,255		-		8,838		1,544,417
Accrued interest receivable		6,122		6,122		-		1,231		4,891
Financial Liabilities:
Deposits	$	1,760,617	$	1,762,853	$	338,412	$	1,424,441	$	-
Advances from Federal Home Loan Bank		22,278		22,471		-		22,471		-
Securities sold under repurchase agreements		48,939		48,939		-		48,939		-
Subordinated debentures		36,083		35,261		-		-		35,261

			Fair Value Measurements at December 31, 2013 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	179,318	$	179,318	$	179,318	$	-	$	-
Investment securities		198,557		198,563		2,372		195,609		582
Federal Home Loan Bank Stock		19,350		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,564,618		1,568,929		-		9,140		1,559,789
Accrued interest receivable		5,778		5,778		4		696		5,078
Financial Liabilities:
Deposits	$	1,735,792	$	1,738,216	$	348,943	$	1,389,273	$	-
Advances from Federal Home Loan Bank		22,520		22,713		-		22,713		-
Securities sold under repurchase agreements		51,919		51,919		-		51,919		-
Subordinated debentures		36,083		35,237		-		-		35,237

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4. Stock Compensation Plans

First Defiance has established equity based compensation plans for its directors and employees. On March 15, 2010, the Board adopted, and the shareholders approved at the 2010 Annual Shareholders Meeting, the First Defiance Financial Corp. 2010 Equity Incentive Plan (the “2010 Equity Plan”). The 2010 Equity Plan replaces all existing plans. All awards currently outstanding under prior plans will remain in effect in accordance with their respective terms. Any new awards will be made under the 2010 Equity Plan. The 2010 Equity Plan allows for issuance of up to 350,000 common shares through the award of options, stock grants, restricted stock units (“RSU”), stock appreciation rights or other stock-based awards.

As of March 31, 2014, 240,420 options had been granted and remain outstanding at option prices based on the market value of the underlying shares on the date the options were granted. Options granted under all plans vest 20% per year except for the 2009 grant to the Company’s executive officers, which vested 40% in 2011 and then 20% annually. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.

In March 2013, the Company approved a 2013 STIP and a 2013 LTIP for selected members of management.

Under the 2013 STIP the participants may earn up to 25% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The participants are required to be employed on the day of payout in order to receive such payment. The final amount of benefits under the 2013 STIP was determined as of December 31, 2013 and paid out in cash in the first quarter of 2014.

Under the 2013 LTIP the participants may earn up to 25% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three year period. The Company granted 86,065 RSU’s to the participants in this Plan effective January 1, 2013, which represents the maximum target award. The amount of benefit under the 2013 LTIP will be determined individually at the 12 month period ending December 31, 2013, the 24 month period ending December 31, 2014 and the 36 month period ending December 31, 2015. The awards’ vesting will be as follows: 16.7% of the target award after the end of the performance period ending December 31, 2013, 27.8% of the target award at the end of the performance period ending December 31, 2014 and 55.5% of the target award at the end of the performance period ending December 31, 2015. The benefits earned under the 2013 LTIP Plan will be paid out in equity in the first quarter following the close of the applicable performance period. The participants are required to be employed on the day of payout in order to receive such payment.

In March 2014, the Company approved a 2014 STIP and a 2014 LTIP for selected members of management.

Under the 2014 STIP the participants may earn up to 30% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The final amount of benefits under the 2014 STIP will be determined as of December 31, 2014 and will be paid out in cash in the first quarter of 2015. The participants are required to be employed on the day of payout in order to receive such payment.

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Under the 2014 LTIP the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three year period. The Company granted 30,538 RSU’s to the participants in this Plan effective January 1, 2014, which represents the maximum target award. The amount of benefit under the 2014 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2016. The awards’ will vest 100% of the target award at the end of the performance period ending December 31, 2016. The benefits earned under the 2014 LTIP Plan will be paid out in equity in the first quarter following the close of the applicable performance period. The participants are required to be employed on the day of payout in order to receive such payment.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The fair value of stock options granted during the three months ended March 31, 2014 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Three Months ended
	March 31, 2014
Expected average risk-free rate		1.64	%
Expected average life		7.44 years
Expected volatility		44.62	%
Expected dividend yield		2.17	%

The weighted-average fair value of options granted for the three months ended March 31, 2014 was $11.25. There were no options granted in the three months ended March 31, 2013.

Following is activity under the plans during the three months ended March 31, 2014:

Stock options	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2014		251,020	$	20.76
Forfeited or cancelled		4,050		23.75
Exercised		7,050		11.24
Granted		500		27.59
Options outstanding, March 31, 2014		240,420	$	21.00		2.92	$	1,483
Vested or expected to vest at March 31, 2014		240,420	$	21.11		2.92	$	1,483
Exercisable at March 31, 2014		230,000	$	21.49		2.81	$	1,307

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As of March 31, 2014, there was $7,000 of total unrecognized compensation costs related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 4.1 years.

At March 31, 2014, 99,132 RSU’s and 5,767 stock grants were outstanding. Compensation expense is recognized over the performance period based on the achievements of targets as established with the plan documents. A total benefit of $45,000 was recorded during the three months ended March 31, 2014 compared to an expense of $273,000 for the same period in 2013. The benefit in the first quarter of 2014 is due to accrual reversals primarily from the 2013 LTIP adjusting for the actual payout in year one as well as adjusting the estimated payouts in year two and three. There was approximately $255,000 included within other liabilities at March 31, 2014 related to the STIPs and LTIPs.

	Restricted Stock Units					Stock Grants
				Weighted-Average				Weighted-Average
				Grant Date				Grant Date
Unvested Shares	Shares			Fair Value		Shares		Fair Value
Unvested at January 1, 2014		106,061		$	18.66		-	$	-
Granted		30,538			25.77		5,767		25.97
Vested		-			-		-		-
Forfeited		(37,467	)		18.71		-		-
Unvested at March 31, 2014		99,132		$	21.32		5,767	$	25.97

The maximum amount of compensation expense that may be recorded for the 2014 STIP and the 2012, 2013 and 2014 LTIPs at March 31, 2014 is approximately $3.8 million. However, the estimated expense expected to be recorded as of March 31, 2014 based on the performance measures in the plans, is $2.2 million of which $1.5 million is unrecognized at March 31, 2014 and will be recognized over the remaining performance periods.

5. Dividends on Common Stock

First Defiance declared and paid a $0.15 per common stock dividend in the first quarter of 2014 and declared and paid a $0.10 per common stock dividend in the first quarter of 2013.

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6. Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share:

	Three months ended March 31,
	2014		2013
	(In Thousands, except per share data)
Numerator for basic and diluted earnings per common share – Net income	$	5,179	$	5,559
Denominator:
Denominator for basic earnings per common share – weighted average common shares		9,681		9,736
Effect of warrants		341		295
Effect of employee stock options		86		74
Denominator for diluted earnings per common share		10,108		10,105
Basic earnings per common share	$	0.53	$	0.57
Diluted earnings per common share	$	0.51	$	0.55

There were 92,250 shares under option granted to employees excluded from the diluted earnings per common share calculation as they were anti-dilutive for the three months ended March 31, 2014. Options to acquire 144,350 shares were excluded from the diluted earnings per common share calculations as they were anti-dilutive for the three months ended March 31, 2013.

7. Investment Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2014	(In Thousands)
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	5,000	$	-	$	(55	)	$	4,945
Mortgage-backed securities – residential		42,183		772		(661	)		42,294
REMICs		1,998		-		(13	)		1,985
Collateralized mortgage obligations		67,721		766		(712	)		67,775
Trust preferred securities and preferred stock		1,610		845		(871	)		1,584
Corporate bonds		6,869		121		(29	)		6,961
Obligations of state and political subdivisions		80,824		3,395		(442	)		83,777
Totals	$	206,205	$	5,899	$	(2,783	)	$	209,321

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	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	30	$	-	$	-	$	30
FNMA certificates		115		3		-		118
GNMA certificates		47		2		-		49
Obligations of state and political subdivisions		186		-		-		186
Totals	$	378	$	5	$	-	$	383

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
At December 31, 2013
Available-for-sale
Obligations of U.S. government corporations and agencies	$	5,000	$	-	$	(79	)	$	4,921
Mortgage-backed securities - residential		41,368		765		(841	)		41,292
Collateralized mortgage obligations		59,865		739		(763	)		59,841
Trust preferred stock and preferred stock		3,264		683		(993	)		2,954
Corporate bonds		8,854		129		(41	)		8,942
Obligations of state and political subdivisions		78,426		2,704		(910	)		80,220
Total Available-for-Sale	$	196,777	$	5,020	$	(3,627	)	$	198,170

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity*:
FHLMC certificates	$	31	$	-	$	-	$	31
FNMA certificates		120		4		-		124
GNMA certificates		50		2		-		52
Obligations of states and political subdivisions		186		-		-		186
Total Held-to-Maturity	$	387	$	6	$	-	$	393

* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

The amortized cost and fair value of the investment securities portfolio at March 31, 2014 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”) and REMICs, which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

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	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,003	$	1,017	$	-	$	-
Due after one year through five years		9,657		9,935		186		186
Due after five years through ten years		36,787		38,491		-		-
Due after ten years		46,856		47,824		-		-
MBS/CMO		111,902		112,054		192		197
	$	206,205	$	209,321	$	378	$	383

Investment securities with a carrying amount of $137.8 million at March 31, 2014 were pledged as collateral on public deposits, securities sold under repurchase agreements, Federal Reserve discount window and FHLB advances.

As of March 31, 2014, the Company’s investment portfolio consisted of 347 securities, 78 of which were in an unrealized loss position.

The following tables summarize First Defiance’s securities that were in an unrealized loss position at March 31, 2014 and December 31, 2013:

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loses
	(In Thousands)
At March 31, 2014
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	1,994	$	(6	)	$	2,951	$	(49	)	$	4,945	$	(55	)
Mortgage-backed securities - residential		20,869		(591	)		1,834		(70	)		22,703		(661	)
REMICs		-		-			1,985		(13	)		1,985		(13	)
Collateralized mortgage obligations		31,762		(571	)		1,714		(141	)		33,476		(712	)
Obligations of state and political subdivisions		11,235		(297	)		2,816		(145	)		14,051		(442	)
Corporate bonds		-		-			2,971		(29	)		2,971		(29	)
Trust preferred stock and preferred stock		-		-			704		(871	)		704		(871	)
Total temporarily impaired securities	$	65,860	$	(1,465	)	$	14,975	$	(1,318	)	$	80,835	$	(2,783	)

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	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loses
	(In Thousands)
At December 31, 2013
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	4,921	$	(79	)	$	-	$	-		$	4,921	$	(79	)
Mortgage-backed securities - residential		24,846		(841	)		-		-			24,846		(841	)
Collateralized mortgage obligations		26,530		(763	)		-		-			26,530		(763	)
Corporate bonds		2,959		(41	)		-		-			2,959		(41	)
Obligations of state and political subdivisions		19,209		(871	)		375		(39	)		19,584		(910	)
Trust preferred stock and preferred stock		-		-			582		(993	)		582		(993	)
Total temporarily impaired securities	$	78,465	$	(2,595	)	$	957	$	(1,032	)	$	79,422	$	(3,627	)

With the exception of the trust preferred securities, the above securities all have fixed interest rates, and all securities have defined maturities. Their fair value is sensitive to movements in market interest rates. First Defiance has the ability and intent to hold these investments for a time necessary to recover the amortized cost without impacting its liquidity position and it is not more than likely that the Company will be required to sell the investments before anticipated recovery.

There were no realized gains from the sales of investment securities in the first quarter of 2014, but there were realized gains of $53,000 ($37,000 after tax) in the first quarter of 2013.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant such an evaluation. The investment portfolio is evaluated for OTTI by segregating the portfolio into two general segments. Investment securities classified as available-for-sale or held-to-maturity are generally evaluated for OTTI under FASB ASC Topic 320. Certain collateralized debt obligations (“CDOs”) are evaluated for OTTI under FASB ASC Topic 325, Investment – Other.

When OTTI occurs under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected compared to the book value of the security and is recognized in earnings. The amount of OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

24

In the first quarter of 2014 and 2013, management determined there was no OTTI.

The Company held six CDOs at March 31, 2014. Four of those CDOs were written down in full prior to January 1, 2010. The remaining two CDOs have a total amortized cost of $1.6 million at March 31, 2014 and had OTTI in prior periods.

Given the conditions in the debt markets today and the absence of observable transactions in the secondary and new issue markets, the Company’s CDOs will be classified within Level 3 of the fair value hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

As required under FASB ASC Topic 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses.

The Company’s CDO valuations were supported by analysis prepared by an independent third party. Their approach to determining fair value involved several steps: 1) detailed credit and structural evaluation of each piece of collateral in the CDO; 2) collateral performance projections for each piece of collateral in the CDO (default, recovery and prepayment/amortization probabilities) and 3) discounted cash flow modeling.

Trust Preferred CDOs Discount Rate Methodology

First Defiance uses market-based yield indicators as a baseline for determining appropriate discount rates, and then adjusts the resulting discount rates on the basis of its credit and structural analysis of specific CDO instruments. The primary focus is on the returns a fixed income investor would require in order to allocate capital on a risk adjusted basis. There is currently no active market for trust preferred CDOs, however, First Defiance looks principally to market yields for stand-alone trust preferred securities issued by banks, thrifts and insurance companies for which there is an active and liquid market. The next step is to make a series of adjustments to reflect the differences that nevertheless exist between these products (both credit and structural) and, most importantly, to reflect idiosyncratic credit performance differences (both actual and projected) between these products and the underlying collateral in the specific CDOs. Importantly, as part of the analysis described above, First Defiance considers the fact that structured instruments frequently exhibit leverage not present in stand-alone instruments, and make adjustments as necessary to reflect this additional risk.

Fundamental to this evaluation is an assessment of the likelihood of CDO coverage test failures that would have the effect of diverting cash flow away from the relevant CDO bond for some period of time. Generally speaking, the Company adjusts indicative credit spreads upwards in the case of CDOs that have relatively weaker collateral and/or less cushion with respect to overcollateralization and interest coverage test ratios and downwards if the reverse is true. This aspect of the Company’s discount rate methodology is important because there is frequently a great difference in the risks present in CDO instruments that are otherwise very similar (i.e. CDOs with the same basic type of collateral, the same manager, the same vintage, etc., may exhibit vastly different performance characteristics). With respect to this last point, First Defiance notes that given today’s credit environment, characterized by high default and deferral rates, it is typically the case that deal-specific credit performance (determined on the basis of the credit characteristics of remaining collateral) is the best indicator of what a willing market participant would pay for an instrument.

25

The amount of OTTI recognized in accumulated other comprehensive income (“AOCI”) was $566,000 for the above mentioned securities at March 31, 2014. There was $645,000 recognized in AOCI at December 31, 2013.

The following table provides additional information related to the two CDO investments for which a balance remains as of March 31, 2014 (dollars in thousands):

CDO	Class	Amortized Cost		Fair Value		Unrealized Loss		OTTI Losses 2014		Lowest Rating	Current Number of Banks and Insurance Companies	Actual Deferrals and Defaults as a % of Current Collateral			Expected Deferrals and Defaults as a % of Remaining Performing Collateral			Excess Sub- ordination as a % of Current Performing Collateral
TPREF Funding II	B		673		305		368		-	Caa3	16		41.10	%		13.48	%		-	%
Preferred Term Sec XXVII	C-1		902		399		503		-	C	32		26.18	%		18.29	%		6.39	%
Total		$	1,575	$	704	$	871	$	-

There were no changes in the accumulated credit losses recognized in earnings for debt securities during the periods ended March 31, 2014 and 2013.

The proceeds from the sales and calls of securities and the associated gains and losses are listed below:

	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Proceeds	$	1,654	$	1,019
Gross realized gains		-		53
Gross realized losses		-		-

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8. Loans

Loans receivable consist of the following: (In Thousands)

	March 31, 2014			December 31, 2013
Real Estate:
Secured by 1-4 family residential	$	196,940		$	195,752
Secured by multi-family residential		152,318			148,952
Secured by commercial real estate		656,753			670,666
Construction		82,049			86,058
		1,088,060			1,101,428
Other Loans:
Commercial		380,144			388,236
Home equity and improvement		106,632			106,930
Consumer Finance		16,346			16,902
		503,122			512,068
Total loans		1,591,182			1,613,496
Deduct:
Undisbursed loan funds		(26,487	)		(32,290	)
Net deferred loan origination fees and costs		(742	)		(758	)
Allowance for loan loss		(24,783	)		(24,950	)
Totals	$	1,539,170		$	1,555,498

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics.

The following table discloses allowance for loan loss activity for the quarter ended

March 31, 2014 and 2013 by portfolio segment and impairment method: (In Thousands)

Quarter Ended March 31, 2014	1-4 Family Residential Real Estate			Multi- Family Residential Real Estate		Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,847		$	2,508	$	12,000		$	134	$	5,678		$	1,635		$	148		$	24,950
Charge-Offs		(228	)		0		(228	)		0		(525	)		(184	)		(11	)		(1,176	)
Recoveries		56			3		722			0		76			31			18			906
Provisions		(36	)		104		(507	)		4		381			165			(8	)		103
Ending Allowance	$	2,639		$	2,615	$	11,987		$	138	$	5,610		$	1,647		$	147		$	24,783

Quarter Ended March 31, 2013	1-4 Family Residential Real Estate			Multi- Family Residential Real Estate		Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Specific Allocations	$	3,506		$	2,197	$	12,702		$	75		$	6,325		$	1,759		$	147		$	26,711
Charge-Offs		(206	)		0		(266	)		0			(205	)		(272	)		(46	)		(995	)
Recoveries		99			0		101			0			76			23			19			318
Provisions		34			213		830			(8	)		(892	)		213			35			425
Ending Allowance	$	3,433		$	2,410	$	13,367		$	67		$	5,304		$	1,723		$	155		$	26,459

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The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2014: (In Thousands)

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	177	$	-	$	1,131	$	-	$	10	$	23	$	-	$	1,341
Collectively evaluated for impairment		2,462		2,615		10,856		138		5,600		1,624		147		23,442
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,639	$	2,615	$	11,987	$	138	$	5,610	$	1,647	$	147	$	24,783
Loans:
Loans individually evaluated for impairment	$	10,298	$	377	$	31,163	$	262	$	7,531	$	2,391	$	56	$	52,078
Loans collectively evaluated for impairment		187,001		152,125		627,421		55,283		373,756		104,676		16,277		1,516,539
Loans acquired with deteriorated credit quality		27		-		174		-		26		-		-		227
Total ending loans balance	$	197,326	$	152,502	$	658,758	$	55,545	$	381,313	$	107,067	$	16,333	$	1,568,844

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The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2013: (In Thousands)

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	220	$	-	$	1,121	$	-	$	6	$	45	$	-	$	1,392
Collectively evaluated for impairment		2,627		2,508		10,879		134		5,672		1,590		148		23,558
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,847	$	2,508	$	12,000	$	134	$	5,678	$	1,635	$	148	$	24,950
Loans:
Loans individually evaluated for impairment	$	10,245	$	840	$	34,874	$	263	$	8,737	$	2,429	$	53	$	57,441
Loans collectively evaluated for impairment		185,923		148,294		637,657		53,467		380,711		104,958		16,838		1,527,848
Loans acquired with deteriorated credit quality		29		-		174		-		27		-		-		230
Total ending loans balance	$	196,197	$	149,134	$	672,705	$	53,730	$	389,475	$	107,387	$	16,891	$	1,585,519

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The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans: (In Thousands)

	Three Months Ended March 31, 2014
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,329	$	85	$	83
Residential Non Owner Occupied		4,084		38		38
Total Residential Real Estate		10,413		123		121
Multi-Family		388		1		1
CRE Owner Occupied		9,837		36		35
CRE Non Owner Occupied		19,355		204		204
Agriculture Land		687		3		2
Other CRE		1,862		5		5
Total Commercial Real Estate		31,741		248		246
Construction		261		3		5
Commercial Working Capital		2,924		3		3
Commercial Other		4,959		2		2
Total Commercial		7,883		5		5
Home Equity and Home Improvement		2,439		25		25
Consumer		57		1		1
Total Impaired Loans	$	53,182	$	406	$	404

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The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans: (In Thousands)

	Three Months Ended March 31, 2013
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,947	$	88	$	86
Residential Non Owner Occupied		4,669		35		35
Total Residential Real Estate		11,616		123		121
Multi-Family		1,444		7		7
CRE Owner Occupied		14,701		62		58
CRE Non Owner Occupied		24,318		203		193
Agriculture Land		926		9		7
Other CRE		5,369		1		1
Total Commercial Real Estate		45,314		275		259
Construction		22		-		-
Commercial Working Capital		1,487		4		5
Commercial Other		6,981		23		22
Total Commercial		8,468		27		27
Home Equity and Home Improvement		2,772		34		32
Consumer		104		2		2
Total Impaired Loans	$	69,740	$	468	$	448

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The following table presents loans individually evaluated for impairment by class of loans: (In Thousands)

	March 31, 2014						December 31, 2013
	Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated
With no allowance recorded:
Residential Owner Occupied	$	4,853	$	4,771	$	-	$	4,744	$	4,729	$	-
Residential Non Owner Occupied		4,061		3,967		-		4,844		4,329		-
Total 1-4 Family Residential Real Estate		8,914		8,738		-		9,588		9,058		-
Multi-Family Residential Real Estate		527		377		-		989		840		-
CRE Owner Occupied		9,202		6,799		-		11,105		8,376		-
CRE Non Owner Occupied		7,600		6,506		-		9,399		7,740		-
Agriculture Land		497		477		-		629		488		-
Other CRE		2,305		1,771		-		3,274		2,452		-
Total Commercial Real Estate		19,604		15,553		-		24,407		19,056		-
Construction		261		262		-		300		263		-
Commercial Working Capital		3,134		2,610		-		3,147		3,146		-
Commercial Other		5,478		4,857		-		6,063		5,415		-
Total Commercial		8,612		7,467		-		9,210		8,561		-
Consumer		56		56		-		53		53		-
Home Equity and Home Improvement		2,228		2,235		-		1,985		1,992		-
Total loans with no allowance recorded	$	40,202	$	34,688	$	-	$	46,532	$	39,823	$	-
With an allowance recorded:
Residential Owner Occupied	$	1,477	$	1,477	$	175	$	1,100	$	1,103	$	218
Residential Non Owner Occupied		83		83		2		84		84		2
Total 1-4 Family Residential Real Estate		1,560		1,560		177		1,184		1,187		220
Multi-Family Residential Real Estate		-		-		-		-		-		-
CRE Owner Occupied		3,153		2,707		161		3,212		2,765		166
CRE Non Owner Occupied		12,592		12,639		961		12,756		12,803		946
Agriculture Land		211		213		7		195		197		7
Other CRE		80		52		2		82		53		2
Total Commercial Real Estate		16,036		15,611		1,131		16,245		15,818		1,121
Construction		-		-		-		-		-		-
Commercial Working Capital		-		-		-		-		-		-
Commercial Other		63		64		10		176		176		6
Total Commercial		63		64		10		176		176		6
Consumer		-		-		-		-		-		-
Home Equity and Home Improvement		155		156		23		436		437		45
Total loans with an allowance recorded	$	17,814	$	17,391	$	1,341	$	18,041	$	17,618	$	1,392

* Presented gross of charge offs

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

	March 31, 2014		December 31, 2013
	(In Thousands)
Non-accrual loans	$	26,774	$	27,847
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		26,774		27,847
Real estate and other assets held for sale		6,028		5,859
Total non-performing assets	$	32,802	$	33,706
Troubled debt restructuring, still accruing	$	26,654	$	27,630

The following table presents the aging of the recorded investment in past due and non accrual loans as of March 31, 2014 by class of loans: (In Thousands)

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Residential Owner Occupied	$	130,405	$	469	$	490	$	782	$	1,741	$	1,173
Residential Non Owner Occupied		63,940		196		8		1,036		1,240		1,804
Total 1-4 Family Residential Real Estate		194,345		665		498		1,818		2,981		2,977
Multi-Family Residential Real Estate		152,502		-		-		-		-		450
CRE Owner Occupied		301,710		462		77		3,573		4,112		7,748
CRE Non Owner Occupied		227,516		30		556		2,087		2,673		5,087
Agriculture Land		82,129		105		396		72		573		613
Other Commercial Real Estate		39,630		103		-		312		415		1,786
Total Commercial Real Estate		650,985		700		1,029		6,044		7,773		15,234
Construction		55,545		-		-		-		-		-
Commercial Working Capital		146,532		169		-		392		561		2,471
Commercial Other		230,415		416		22		3,367		3,805		5,259
Total Commercial		376,947		585		22		3,759		4,366		7,730
Consumer Finance		16,287		34		12		-		46		-
Home Equity/Home Improvement		106,127		352		194		394		940		395
Total Loans	$	1,552,738	$	2,336	$	1,755	$	12,015	$	16,106	$	26,786

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The following table presents the aging of the recorded investment in past due and non accrual loans as of December 31, 2013 by class of loans: (In Thousands)

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Residential Owner Occupied	$	126,855	$	1,530	$	191	$	1,009	$	2,730	$	1,329
Residential Non Owner Occupied		65,292		531		403		386		1,320		1,943
Total 1-4 Family Residential Real Estate		192,147		2,061		594		1,395		4,050		3,272
Multi-Family Residential Real Estate		149,134		-		-		-		-		583
CRE Owner Occupied		311,253		334		495		3,671		4,500		7,492
CRE Non Owner Occupied		225,433		1,067		918		902		2,887		4,717
Agriculture Land		81,954		21		-		73		94		630
Other Commercial Real Estate		45,297		-		-		1,287		1,287		2,412
Total Commercial Real Estate		663,937		1,422		1,413		5,933		8,768		15,251
Construction		53,730		-		-		-		-		-
Commercial Working Capital		155,373		-		-		419		419		2,917
Commercial Other		230,054		37		26		3,566		3,629		5,419
Total Commercial		385,427		37		26		3,985		4,048		8,336
Consumer Finance		16,759		131				-		131		-
Home Equity/Home Improvement		105,657		1,163		155		413		1,731		413
Total Loans	$	1,566,791	$	4,814	$	2,188	$	11,726	$	18,728	$	27,855

Troubled Debt Restructurings

As of March 31, 2014 and December 31, 2013, the Company has a recorded investment in troubled debt restructurings (“TDRs”) of $32.8 million and $33.4 million, respectively. The Company has allocated $1.2 million of specific reserves to those loans at each of March 31, 2014 and December 31, 2013, and has committed to lend additional amounts totaling up to $3,000 and $300,000 at March 31, 2014 and December 31, 2013, respectively.

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Each TDR is uniquely designed to meet the specific needs of the borrower. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral or an additional guarantor is often requested when granting a concession. Commercial mortgage loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments, and sometimes reducing the interest rate lower than the current market rate. Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended. Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues. All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

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Of the loans modified in a TDR, $6.1 million are on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance. Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan. If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off. If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ending March 31, 2014 and March 31, 2013:

	Loans Modified as a TDR for the Three Months Ended March 31, 2014 ($ in thousands)				Loans Modified as a TDR for the Three Months Ended March 31, 2013 ($ in thousands)
Troubled Debt Restructurings	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
1-4 Family Owner Occupied		9	$	763		4	$	367
1-4 Family Non Owner Occupied		0		-		1		198
CRE Owner Occupied		0		-		1		29
CRE Non Owner Occupied		1		361		0		-
Agriculture Land		0		-		1		219
Other CRE		0		-		0		0
Commercial Working Capital or Other		2		321		1		14
Home Equity and Improvement		3		60		8		492
Consumer Finance		3		11		2		4
Total		18	$	1,516		18	$	1,323

The loans described above decreased the ALLL by $70,000 in the three month period ending March 31, 2014 and by $15,000 in the three month period ending March 31, 2013.

Of the 2014 modifications, 6 were made TDRs due to the fact that the borrower has been in bankruptcy, 3 were made TDRs due to a rate reduction, 1 was made a TDR due to an interest only period, 4 were made TDRs due to extending the amortization, 1 was made a TDR due to a reduction in the payment, 1 was made a TDR due to advancing funds to a substandard credit, and 2 were made to refinance current debt for payment relief.

The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the quarters ending March 31, 2014 and March 31, 2013:

35

	Three Months Ended March 31, 2014 ($ in thousands)				Three Months Ended March 31, 2013 ($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
1-4 Family Owner Occupied		0	$	-		4	$	312
1-4 Family Non Owner Occupied		0		-		1		198
CRE Owner Occupied		0		-		2		858
CRE Non Owner Occupied		0		-		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial Working Capital or Other		0		-		2		744
Home Equity and Improvement		0		-		4		53
Consumer Finance		0		-		0		-
Total		0	$	-		13	$	2,165

The TDRs that subsequently defaulted described above decreased the allowance for loan losses by $1,000 for the period ended March 31, 2013.

The terms of certain other loans were modified during the period ending March 31, 2014 that did not meet the definition of a TDR. The modification of these loans involved a modification of the terms of a loan to borrowers who were not experiencing financial difficulties. A total of 24 loans were modified under this definition during the three month period ended March 31, 2014.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Credit Quality Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are analyzed individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis. First Defiance uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

36

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Not Graded. Loans classified as not graded are generally smaller balance residential real estate, home equity and consumer installment loans which are originated primarily by using an automated underwriting system. These loans are monitored based on their delinquency status and are evaluated individually only if they are seriously delinquent.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of March 31, 2014, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (In Thousands)

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
1-4 Family Owner Occupied	$	3,381	$	17	$	2,068	$	782	$	125,899	$	132,147
1-4 Family Non Owner Occupied		50,472		2,975		5,673		-		6,059		65,179
Total 1-4 Family Real Estate		53,853		2,992		7,741		782		131,958		197,326
Multi-Family Residential Real Estate		148,487		1,761		1,302		-		952		152,502
CRE Owner Occupied		282,897		11,643		9,696		-		1,585		305,821
CRE Non Owner Occupied		200,123		13,014		17,014		-		39		230,190
Agriculture Land		81,229		570		903		-		-		82,702
Other CRE		35,536		918		2,908		-		683		40,045
Total Commercial Real Estate		599,785		26,145		30,521		-		2,307		658,758
Construction		46,059		-		262		-		9,224		55,545
Commercial Working Capital		139,428		4,406		3,260		-		-		147,094
Commercial Other		217,391		10,227		6,601		-		-		234,219
Total Commercial		356,819		14,633		9,861		-		-		381,313
Home Equity and Home Improvement		-		-		546		394		106,127		107,067
Consumer Finance		-		-		46		-		16,287		16,333
Total Loans	$	1,205,003	$	45,531	$	50,279	$	1,176	$	266,855	$	1,568,844

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As of December 31, 2013, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (In Thousands)

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
1-4 Family Owner Occupied	$	4,287	$	18	$	3,515	$	-	$	121,765	$	129,585
1-4 Family Non Owner Occupied		51,660		2,894		5,699		-		6,359		66,612
Total 1-4 Family Real Estate		55,947		2,912		9,214		-		128,124		196,197
Multi-Family Residential Real Estate		145,407		875		1,888		-		964		149,134
CRE Owner Occupied		291,770		10,584		11,665		-		1,734		315,753
CRE Non Owner Occupied		200,790		10,254		17,185		-		91		228,320
Agriculture Land		80,418		578		1,051		-		-		82,047
Other CRE		40,676		2,074		3,104		-		731		46,585
Total Commercial Real Estate		613,654		23,490		33,005		-		2,556		672,705
Construction		43,465		-		263		-		10,002		53,730
Commercial Working Capital		148,703		3,429		3,660		-		-		155,792
Commercial Other		219,790		6,994		6,899		-		-		233,683
Total Commercial		368,493		10,423		10,559		-		-		389,475
Home Equity and Home Improvement		-		-		755		45		106,587		107,387
Consumer Finance		-		-		31		-		16,860		16,891
Total Loans	$	1,226,966	$	37,700	$	55,715	$	45	$	265,093	$	1,585,519

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9. Mortgage Banking

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Gain from sale of mortgage loans	$	641		$	2,176
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		905			870
Amortization of mortgage servicing rights		(292	)		(689	)
Mortgage servicing rights valuation adjustments		(7	)		473
		606			654
Net revenue from sale and servicing of mortgage loans	$	1,247		$	2,830

The unpaid principal balance of residential mortgage loans serviced for third parties was $1.4 billion at March 31, 2014 and December 31, 2013.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three months ended March 31, 2014 and 2013:

	March 31, 2014			March 31, 2013
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,133		$	10,121
Loans sold, servicing retained		207			762
Amortization		(292	)		(689	)
Carrying value before valuation allowance at end of period		10,048			10,194
Valuation allowance:
Balance at beginning of period		(1,027	)		(2,288	)
Impairment (expense) recovery		(7	)		473
Balance at end of period		(1,034	)		(1,815	)
Net carrying value of MSRs at end of period	$	9,014		$	8,379
Fair value of MSRs at end of period	$	9,628		$	8,436

Amortization of mortgage servicing rights is computed based on payments and payoffs of the related mortgage loans serviced. Estimates of future amortization expense are not easily estimable.

The Company has established an accrual for estimated secondary market buy-back losses in the first quarter of 2014. An accrual for secondary market buy-backs was established in the first quarter of 2014 for $92,000 which was mostly offset by reversing $67,000 of accrued expenses related to the Freddie Mac post-foreclosure review that began in the third quarter of 2013 and was reversed in 2014 with no losses resulting.

Included in the first quarter of 2013 is an accrual for estimated secondary market buy-back losses of $581,000. These losses were accrued and expensed as of March 31, 2013 based on an estimated exposure to repurchase requests resulting from notifications received from Fannie Mae’s post-foreclosure review process during the first quarter of 2013.

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10. Deposits

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

	March 31, 2014		December 31, 2013
	(In Thousands)
Non-interest-bearing checking accounts	$	338,412	$	348,943
Interest-bearing checking and money market accounts		740,783		715,939
Savings deposits		199,361		185,121
Retail certificates of deposit less than $100,000		309,758		313,335
Retail certificates of deposit greater than $100,000		172,303		172,454
	$	1,760,617	$	1,735,792

11. Borrowings

First Defiance’s debt, FHLB advances and junior subordinated debentures owed to unconsolidated subsidiary trusts are comprised of the following:

	March 31, 2014		December 31, 2013
	(In Thousands)
FHLB Advances:
Putable advances	$	12,000	$	12,000
Amortizable mortgage advances		10,278		10,520
Total	$	22,278	$	22,520
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

The putable advances can be put back to the Company at the option of the FHLB on a quarterly basis. $12.0 million of the putable advances with a weighted average rate of 2.72% were not yet callable by the FHLB at March 31, 2014. The call dates for these advances range from April 14, 2014 to June 12, 2014 and the maturity dates range from January 14, 2015 to March 12, 2018. Putable advances are callable at the option of the FHLB on a quarterly basis.

In March 2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust II (Trust Affiliate II) 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 Trust Affiliate II. The Company formed Trust Affiliate II 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 Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.Distributions on the Trust Preferred Securities issued by Trust Affiliate II 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 1.5%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was 1.73% as of March 31, 2014 and 1.75% as of December 31, 2013.

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The Company also sponsored an affiliated trust, First Defiance Statutory Trust I (Trust Affiliate I), that issued $20 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed 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 Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was 1.61% and 1.63% on March 31, 2014 and December 31, 2013 respectively.

The Trust Preferred Securities issued by Trust Affiliates I and II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into agreements that fully and unconditionally guarantee the Trust Preferred Securities subject to the terms of the guarantees. The Trust Preferred Securities and Subordinated Debentures issued by Trust Affiliate I mature on December 15, 2035 but may be redeemed by the issuer at par after October 28, 2010. The Trust Preferred Securities issued by Trust Affiliate II 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.

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.

12. Commitments, Guarantees and Contingent Liabilities

Loan commitments are made to accommodate the financial needs of First Federal’s customers; however, there are no long-term, fixed-rate loan commitments that result in market risk. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. They primarily are issued to facilitate customers’ trade transactions.

Both arrangements 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 loans and unused lines of credit) and standby letters of credit outstanding as of the periods stated below were as follows: (In Thousands)

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	March 31, 2014				December 31, 2013
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	35,915	$	51,951	$	57,914	$	59,632
Unused lines of credit		16,958		267,666		18,048		257,939
Standby letters of credit		-		18,052		-		17,680
Total	$	52,873	$	337,669	$	75,962	$	335,251

Commitments to make loans are generally made for periods of 60 days or less.

In addition to the above commitments, First Defiance had commitments to sell $14.8 million and $12.1 million of loans to Freddie Mac, Fannie Mae, Federal Home Loan Bank of Cincinnati or BB&T Mortgage at March 31, 2014 and December 31, 2013, respectively.

13. Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Indiana. The Company is no longer subject to examination by taxing authorities for years before 2009. The Company currently operates primarily in the states of Ohio and Michigan, which tax financial institutions based on their equity rather than their income.

14. Derivative Financial Instruments

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. First Federal had approximately $10.7 million and $7.5 million of interest rate lock commitments at March 31, 2014 and December 31, 2013, respectively. There were $14.8 million and $12.1 million of forward commitments for the future delivery of residential mortgage loans at March 31, 2014 and December 31, 2013, respectively.

The fair value of these mortgage banking derivatives are reflected by a derivative asset. The table below provides data about the carrying values of these derivative instruments:

March 31, 2014

December 31, 2013

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

$

345

$

-

$

345

$

295

$

-

$

295

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The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments:

	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	50	$	(161	)

The above amounts are included in mortgage banking income with gain on sale of mortgage loans.

Note 15 - Other Comprehensive Income (Loss)

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale or call of securities in the accompanying consolidated condensed statements of income.

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
	(In Thousands)
Three months ended March 31, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period	$	1,723		$	603		$	1,120
Reclassification adjustment for net gains included in net income		-			-			-
Total other comprehensive loss	$	1,723		$	603		$	1,120
Three months ended March 31, 2013:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period	$	(664	)	$	(235	)	$	(429	)
Reclassification adjustment for net gains included in net income		(53	)		(16	)		(37	)
Total other comprehensive loss	$	(717	)	$	(251	)	$	(466	)

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Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

							Accumulated
	Securities			Post-			Other
	Available			retirement			Comprehensive
	For Sale			Benefit			Income
	(In Thousands)
Balance January 1, 2014	$	906		$	(361	)	$	545
Other comprehensive loss before reclassifications		1,120			-			1,120
Amounts reclassified from accumulated other comprehensive loss		-			-			-
Net other comprehensive loss during period		1,120			-			1,120
Balance March 31, 2014	$	2,026		$	(361	)	$	1,665
Balance January 1, 2013	$	4,851		$	(577	)	$	4,274
Other comprehensive loss before reclassifications		(429	)		-			(429	)
Amounts reclassified from accumulated other comprehensive loss		(37	)		-			(37	)
Net other comprehensive loss during period		(466	)		-			(466	)
Balance March 31, 2013	$	4,385		$	(577	)	$	3,808

Note 16 – Subsequent Event

On April 21, 2014, the First Federal and First Community Bank (“FCB”) jointly announced the termination of the previously announced merger agreement dated February 18, 2014. Both companies mutually agreed to terminate the agreement after it became evident that completion of the merger would take significantly longer than originally expected. The Company incurred $786,000 in costs related to the termination in the first quarter of 2014.

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

Forward-Looking Information

Certain statements contained in this quarterly report 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 Exchange 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. The Company assumes no obligation to update any forward-looking statements.

General

First Defiance is a unitary thrift holding company that conducts business through its subsidiaries, First Federal, First Insurance and First Defiance Risk Management. First Federal is a federally chartered stock savings bank that provides financial services to communities through 33 full service banking centers in communities based in northwest Ohio, northeast Indiana, and southeastern Michigan. 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 and wealth management services through its extensive branch network. First Insurance sells a variety of property and casualty, group health and life, and individual health and life insurance products. Insurance products are sold through First Insurance’s offices in Defiance, Bryan, Bowling Green, Maumee and Oregon, Ohio areas. First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company that insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. First Defiance Risk Management was incorporated on December 20, 2012.

Impact of Legislation - Over the last several years, Congress and the U.S. Department of the Treasury have enacted legislation and taken actions to address the disruptions in the financial system, declines in the housing market, and the overall regulation of financial institutions and the financial system. In this regard, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), includes provisions affecting large and small financial institutions alike, including several provisions that profoundly affect the regulation of community banks, thrifts, and bank and thrift holding companies, such as First Defiance. Also, the Dodd-Frank Act abolished the Office of Thrift Supervision effective July 21, 2011 and transferred its functions to the Office of the Comptroller of the Currency (“OCC”), FDIC, and Federal Reserve. The Dodd-Frank Act relaxed rules regarding interstate branching, allows financial institutions to pay interest on business checking accounts, changed the scope of federal deposit insurance coverage, imposed new capital requirements on bank and thrift holding companies, and imposed limits on debit card interchange fees charged by issuer banks (commonly known as the Durbin Amendment).

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The Dodd-Frank Act also established the Consumer Financial Protection Bureau (“CFPB”) as an independent bureau within the Federal Reserve, which has broad authority to regulate consumer financial products and services and entities offering such products and services, including banks. Many of the consumer financial protection functions formerly assigned to the federal banking and other designated agencies are now performed by the CFPB. The CFPB has broad rulemaking authority over providers of credit, savings, and payment services and products. In this regard, the CFPB has the authority to implement regulations under federal consumer protection laws and enforce those laws against, and examine, financial institutions. State officials also will be authorized to enforce consumer protection rules issued by the CFPB. This bureau also is authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data, and promote the availability of financial services to underserved consumers and communities. The CFPB also is directed to prevent “unfair, deceptive or abusive practices” and ensure that all consumers have access to markets for consumer financial products and services and that such markets are fair, transparent, and competitive. Although the CFPB has begun to implement its regulatory, supervisory, examination, and enforcement authority, there continues to be significant uncertainty as to how the agency’s strategies and priorities will impact First Defiance.

The CFPB has indicated that mortgage lending is an area of supervisory focus and that it will concentrate its examination and rulemaking efforts on the variety of mortgage-related topics required under the Dodd-Frank Act, including steering consumers to less-favorable products, discrimination, abusive or unfair lending practices, predatory lending, origination disclosures, minimum mortgage underwriting standards, mortgage loan originator compensation, and servicing practices. The CFPB recently published several final regulations impacting the mortgage industry, including rules related to ability-to-pay, mortgage servicing, and mortgage loan originator compensation. The ability-to-repay rule makes lenders liable if they fail to assess ability to repay under a prescribed test, but also creates a safe harbor for so called “qualified mortgages.” The “qualified mortgages” standards include a tiered cap structure that places limits on the total amount of certain fees that can be charged on a loan, a 43% cap on debt-to-income (i.e., total monthly payments on debt to monthly gross income), exclusion of interest-only products, and other requirements. The 43% debt-to-income cap does not apply for the first seven years the rule is in effect for loans that are eligible for sale to Fannie Mae or Freddie Mac or eligible for government guarantee through the FHA or the Veterans Administration. Failure to comply with the ability-to-repay rule may result in possible CFPB enforcement action and special statutory damages plus actual, class action, and attorney fees damages, all of which a borrower may claim in defense of a foreclosure action at any time. First Defiance’s management team is currently assessing the impact of these requirements on our mortgage lending business.

In addition, the Federal Reserve and other federal bank regulatory agencies have issued a proposed rule under the Dodd-Frank Act that would exempt “qualified residential mortgages” from the securitization risk retention requirements of the Dodd-Frank Act. The final definition of what constitutes a “qualified residential mortgage” may impact the pricing and depth of the secondary market into which the Company may sell mortgages it originates. At this time, First Defiance cannot predict the content of the final CFPB and other federal agency regulations or the impact they might have on First Defiance’s financial results. The CFPB’s authority over mortgage lending, and its authority to change regulations adopted in the past by other regulators, or to rescind or ignore past regulatory guidance, could increase First Defiance’s compliance costs and litigation exposure.

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First Defiance’s management team continues to actively monitor the implementation of the Dodd-Frank Act and the regulations promulgated thereunder and assess its probable impact on the business, financial condition, and results of operations of First Defiance. However, the ultimate effect of the Dodd-Frank Act on the financial services industry in general, and First Defiance in particular, continues to be uncertain.

New Capital Rules - On July 2, 2013, the Federal Reserve approved final rules that substantially amend the regulatory risk-based capital rules applicable to First Defiance and First Federal. The FDIC and the OCC have subsequently approved these rules. The final rules were adopted following the issuance of proposed rules by the Federal Reserve in June 2012, and implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act.

 The rules include new risk-based capital and leverage ratios, which will be phased in from 2015 to 2019, and will refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to First Defiance and First Federal under the final rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The final rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital. The capital conservation buffer will be phased-in over four years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. This will result in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

The final rules implement revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which will be phased out over time. However, the final rules provide that small depository institution holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes First Defiance) will be able to permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.

47

The final rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including First Federal, if their capital levels begin to show signs of weakness. These revisions take effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions will be required to meet the following increased capital level requirements in order to qualify as “well capitalized”: (i) a new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (increased from 4%).

The final rules set forth certain changes for the calculation of risk-weighted assets, which First Federal will be required to utilize beginning January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in total assets that are not subject to the “advanced approaches rules” that apply to banks with greater than $250 billion in consolidated assets.

  Based on our current capital composition and levels, management believes it will be in compliance with the requirements as set forth in the final rules.

Business Strategy - First Defiance’s primary objective is to be a high performing community banking organization, well regarded in its market areas. First Defiance accomplishes this through emphasis on local decision making and empowering its employees with tools and knowledge to serve its customers’ needs. First Defiance believes in a “Customer First” philosophy that is strengthened by its Trusted Advisor initiative. First Defiance also has a tagline of “Better Together” as an indication of its commitment to local, responsive, personalized service. First Defiance believes this strategy results in greater customer loyalty and profitability through core relationships. First Defiance is focused on diversification of revenue sources and increased market penetration in areas where the growth potential exists for a balance between acquisition and organic growth. The primary elements of First Defiance’s business strategy are commercial banking, consumer banking, including the origination and sale of single family residential loans, enhancement of fee income, wealth management and insurance sales, each united by a strong customer service culture throughout the organization.

Commercial and Commercial Real Estate Lending - Commercial and commercial real estate lending have been an ongoing focus and a major component of First Federal’s success. First Federal provides primarily commercial real estate and commercial business loans with an emphasis on owner occupied commercial real estate and commercial business lending with a focus on the deposit balances that accompany these relationships. First Federal’s client base tends to be small to middle market customers with annual gross revenues generally between $1 million and $50 million. First Federal’s focus is also on securing multiple guarantors in addition to collateral where possible. These customers require First Federal to have a high degree of knowledge and understanding of their business in order to provide them with solutions to their financial needs. First Federal’s Customer First philosophy and culture complements this need of its clients. First Federal believes this personal service model differentiates First Federal from its competitors, particularly the larger regional institutions. First Federal offers a wide variety of products to support commercial clients including remote deposit capture and other cash management services. First Federal also believes that the small business customer is a strong market for First Federal. First Federal participates in many of the Small Business Administration lending programs and implemented a new program in 2014 targeting the small business customer. Maintaining a diversified portfolio with an emphasis on monitoring industry concentrations and reacting to changes in the credit characteristics of industries is an ongoing focus.

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Consumer Banking - First Federal offers customers a full range of deposit and investment products including demand, checking, money market, certificates of deposits, Certificate of Deposit Account Registry Service (“CDARS”) and savings accounts. First Federal offers a full range of investment products through the wealth management department and a wide variety of consumer loan products, including residential mortgage loans, home equity loans, and installment loans. First Federal also offers online banking services, which include mobile banking, online bill pay along with debit cards.

Fee Income Development - Generation of fee income and the diversification of revenue sources are accomplished through the mortgage banking operation, insurance subsidiary and the wealth management department as First Defiance seeks to reduce reliance on retail transaction fee income.

Deposit Growth - First Federal’s focus has been to grow core deposits with an emphasis on total relationship banking with both our retail and commercial customers. First Federal has initiated a pricing strategy that considers the whole relationship of the customer. First Federal will continue to focus on increasing its market share in the communities it serves by providing quality products with extraordinary customer service, business development strategies and branch expansion. First Federal will look to grow its footprint in areas believed to further complement its overall market share and complement its strategy of being a high performing community bank.

Asset Quality - Maintaining a strong credit culture is of the utmost importance to First Federal. First Federal has maintained a strong credit approval and review process that has allowed the Company to maintain a credit quality standard that balances the return with the risks of industry concentrations and loan types. First Federal is primarily a collateral lender with an emphasis on cash flow performance, while obtaining additional support from personal guarantees and secondary sources of repayment. First Federal has directed its attention on loan types and markets that it knows well and in which it has historically been successful. First Federal strives to have loan relationships that are well diversified in both size and industry, and monitor the overall trends in the portfolio to maintain its industry and loan type concentration targets. First Federal maintains a problem loan remediation process that focuses on detection and resolution. First Federal maintains a strong process of internal control that subjects the loan portfolio to periodic internal reviews as well as independent third party loan review.

Expansion Opportunities - First Defiance believes it is well positioned to take advantage of acquisitions or other business opportunities in its market areas. First Defiance believes it has a track record of successfully accomplishing both acquisitions and de novo branching in its market area. This track record puts the Company in a solid position to enter or expand its business. First Defiance will consider expansion opportunities, including bank and insurance acquisitions, de novo branching, with a particular focus on its primary geographic market area, as well as loan production offices.

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Investments - 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 ASC Topic 320.

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 $378,000 at March 31, 2014. 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 $209.3 million at March 31, 2014. The available-for-sale portfolio consists of obligations of U.S. Government corporations and agencies ($4.9 million), certain municipal obligations ($83.8 million), CMOs/REMICs ($69.7 million), corporate bonds ($7.0 million), mortgage backed securities ($42.3 million), and trust preferred and preferred stock ($1.6 million).

In accordance with ASC Topic 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income.

Lending - In order to properly assess the collateral dependent loans included in its loan portfolio, the Company has established policies regarding the monitoring of the collateral underlying such loans. The Company requires an appraisal that is less than one year old for all new collateral dependent real estate loans, and all renewed collateral dependent real estate loans where significant new money is extended. The appraisal process is handled by the Credit Department, which selects the appraiser and orders the appraisal. First Defiance’s loan policy prohibits the account officer from talking or communicating with the appraiser to insure that the appraiser is not influenced by the account officer in any way in making their determination of value.

First Federal generally does not require updated appraisals for performing loans unless significant new money is requested by the borrower.

When a collateral dependent loan is downgraded to classified status, First Federal reviews the most current appraisal on file and if necessary, based on First Federal’s assessment of the appraisal, such as age, market, etc, First Federal will discount this amount to a more appropriate current value based on inputs from lenders and realtors. This amount may then be discounted further by First Federal’s estimation of the carrying and selling costs. In most instances, if the appraisal is more than twelve to fifteen months old, we may require a new appraisal. Finally, First Federal assesses whether there is any collateral short fall, taking into consideration guarantor support and liquidity, and determines if a charge off is necessary.

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When a collateral dependent loan moves to non-performing status, First Federal generally gets a new third party appraisal and charges the loan down appropriately based upon the new appraisal and an estimate of costs to liquidate the collateral. All properties that are moved into the Other Real Estate Owned (“OREO”) category are supported by current appraisals, and the OREO is carried at the lower of cost or fair value, which is determined based on appraised value less First Federal’s estimate of the liquidation costs.

First Federal does not adjust any appraisals upward without written documentation of this valuation change from the appraiser. When setting reserves and charge offs on classified loans, appraisal values may be discounted downward based upon First Federal’s experience with liquidating similar properties.

All loans over 90 days past due and/or on non-accrual are classified as non-performing loans. Non-performing status automatically occurs in the month in which the 90 day delinquency occurs.

As stated above, once a collateral dependent loan is identified as non-performing, First Federal generally gets an appraisal.

Appraisals are received within approximately 60 days after they are requested. The First Federal Loan Loss Reserve Committee reviews the amount of each new appraisal and makes any necessary charge off decisions at its meeting prior to the end of each quarter.

Any partially charged-off collateral dependent loans are considered non-performing, and as such, would need to show an extended period of time with satisfactory payment performance as well as cash flow coverage capability supported by current financial statements before First Federal will consider an upgrade to performing status. First Federal may consider moving the loan to accruing status after approximately six months of satisfactory payment performance.

For loans where First Federal determines that an updated appraisal is not necessary, other means are used to verify the value of the real estate, such as recent sales of similar properties on which First Federal had loans as well as calls to appraisers, brokers, realtors and investors. First Federal monitors and tracks its loan to value quarterly to determine accuracy and any necessary charge offs. Based on these results, changes may occur in the processes used.

Loan modifications constitute a Troubled Debt Restructuring (“TDR”) if First Federal for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that it would not otherwise consider. For loans that are considered TDRs, First Federal either computes the present value of expected future cash flows discounted at the original loan’s effective interest rate or it may measure impairment based on the fair value of the collateral. For those loans measured for impairment utilizing the present value of future cash flows method, any discount is carried as a reserve in the allowance for loan and lease losses. For those loans measured for impairment utilizing the fair value of the collateral, any shortfall is charged off.

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Earnings - 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, FHLB advances, and other borrowings. The Company’s non-interest income is mainly derived from service fees and other charges, 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.

Changes in Financial Condition

At March 31, 2014, First Defiance's total assets, deposits and stockholders' equity amounted to $2.16 billion, $1.76 billion and $274.9 million, respectively, compared to $2.14 billion, $1.74 billion and $272.1 million, respectively, at December 31, 2013.

Net loans receivable (excluding loans held for sale) declined $16.3 million to $1.54 billion. The variance in loans receivable between March 31, 2014 and December 31, 2013 include decreases in commercial loans (down $8.1 million), home equity and improvement loans (down $0.3 million), consumer loans (down $0.6 million), commercial real estate loans (down $10.5 million), and construction loans (down $4.0 million) while one to four family residential real estate loans increased $1.2 million.

The investment securities portfolio increased $11.1 million to $209.7 million at March 31, 2014 from $198.6 million at December 31, 2013. The increase is the result of $17.4 million of securities being purchased during the first three months of 2014, somewhat offset by $2.1 million of securities maturing or being called in the period, principal pay downs of $3.4 million in CMOs and mortgage-backed securities, and $1.7 million from two securities being sold. There was an unrealized gain in the investment portfolio of $3.1 million at March 31, 2014 compared to an unrealized gain of $1.4 million at December 31, 2013.

Deposits increased from $1.74 billion at December 31, 2013 to $1.76 billion as of March 31, 2014. Non-interest bearing demand deposits decreased $10.5 million to $338.4 million and retail time deposits decreased $3.7 million to $482.1 million. These decreases were mostly offset by increases in interest-bearing demand deposits and money market accounts of $24.8 million to $740.8 million and savings accounts of $14.2 million to $199.4 million.

Stockholders’ equity increased from $272.1 million at December 31, 2013 to $274.9 million at March 31, 2014. The increase in stockholders’ equity was the result of recording net income of $5.2 million and an increase in other comprehensive income of $1.1 million partially offset by $1.4 million of common stock dividends being paid in the first quarter of 2014 and $1.8 million in repurchased common stock.

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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 (dollars in thousands).

	Three Months Ended March 31,
	2014							2013
	Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,544,902	$	16,672		4.38	%	$	1,500,222	$	16,814		4.55	%
Securities		202,275		1,932		3.93			196,571		1,794		3.85
Interest bearing deposits		172,666		101		0.24			106,332		58		0.22
FHLB stock		17,302		195		4.57			19,964		219		4.45
Total interest-earning assets		1,937,145		18,900		3.96			1,823,089		18,885		4.22
Non-interest-earning assets		209,224							204,817
Total assets	$	2,146,369						$	2,027,906
Interest-bearing liabilities:
Deposits	$	1,399,951	$	1,358		0.39	%	$	1,356,547	$	1,647		0.49	%
FHLB advances and other		22,363		133		2.41			12,788		90		2.85
Subordinated debentures		36,134		146		1.64			36,136		152		1.71
Notes payable		52,588		41		0.32			46,396		60		0.52
Total interest-bearing liabilities		1,511,036		1,678		0.45			1,451,867		1,949		0.54
Non-interest bearing deposits		341,286		-					294,225		-
Total including non-interest bearing demand deposits		1,852,322		1,678		0.37			1,746,092		1,949		0.45
Other non-interest-bearing liabilities		20,302							22,189
Total liabilities		1,872,624							1,768,281
Stockholders' equity		273,745							259,625
Total liabilities and stock- holders' equity	$	2,146,369						$	2,027,906
Net interest income; interest rate spread			$	17,222		3.51	%			$	16,936		3.68	%
Net interest margin (3)						3.61	%						3.78	%
Average interest-earning assets to average interest-bearing liabilities						128	%						126	%

(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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Results of Operations

Three Months Ended March 31, 2014 and 2013

On a consolidated basis, First Defiance’s net income for the quarter ended March 31, 2014 was $5.2 million compared to net income of $5.6 million for the comparable period in 2013. On a per share basis, basic and diluted earnings per common share for the three months ended March 31, 2014 were $0.53 and $0.51, respectively, compared to basic and diluted earnings per common share of $0.57 and $0.55, respectively, for the quarter ended March 31, 2013. The first quarter 2014 results were negatively impacted by $511,000 ($786,000 before tax), or $0.05 per diluted common share, for costs related to the termination of the merger with First Community Bank.

Net Interest Income

First Defiance’s net interest income is determined by its interest rate spread (i.e. the difference between the yields on its interest-earning assets and the rates paid on its interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities.

Net interest income was $16.8 million for the quarter ended March 31, 2014, up from $16.5 million for the same period in 2013. The tax-equivalent net interest margin was 3.61% for the quarter ended March 31, 2014, down from 3.78% for the same period in 2013. The reduction in margin between the 2013 and 2014 first quarters was due to a reduction in interest-earning asset yields, which decreased to 3.96% for the quarter ended March 31, 2014, down 26 basis points from 4.22% for the same period in 2013. This was partially offset by the cost of interest-bearing liabilities between the two periods decreasing 9 basis points to 0.37% in the first quarter of 2014 from 0.45% in the same period in 2013. Operating at a high level of liquidity along with lower loan yields has impacted the net interest margin negatively in the first quarter of 2014. Management continues to analyze and look for additional opportunities to maintain its margin, as well as other alternatives to minimize the impact of the sustained low rate environment.

Total interest income remained flat at $18.5 million for the quarters ended March 31, 2014 and March 31, 2013. An increase in the investment portfolio was partially offset by a decrease in loan interest income caused by a drop in yields, which declined 17 basis points to 4.38% at March 31, 2014. Interest income from investments increased to $1.5 million for the quarter ended March 31, 2014 compared to $1.4 million for the same period in 2013, while income from loans decreased to $16.7 million for the quarter ended March 31, 2014 compared to $16.8 million for the same period in 2013.

Interest expense decreased by $271,000 million in the first quarter of 2014 compared to the same period in 2013, to $1.7 million from $1.9 million. This decrease was due to a 9 basis point decline in the average cost of interest-bearing liabilities in the first quarter of 2014 from the continued low rate environment resulting in slight decreases in rate on all the interest-bearing liability categories. Interest expense related to interest-bearing deposits was $1.4 million in the first quarter of 2014 compared to $1.6 million for the same period in 2013. Interest expense recognized by the Company related to subordinated debentures was $146,000 in the first quarter of 2014 compared to $152,000 for the same period in 2013. Expenses on FHLB advances and securities sold under repurchase agreements were $133,000 and $41,000 respectively in the first quarter of 2014 compared to $90,000 and $60,000 respectively for the same period in 2013.

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Allowance for Loan Losses

The allowance for loan losses represents management’s assessment of the estimated probable credit losses in the loan portfolio at each balance sheet date. Management analyzes the adequacy of the allowance for loan losses regularly through reviews of the loan portfolio. Consideration is given to economic conditions, changes in interest rates and the effect of such changes on collateral values and borrower’s ability to pay, changes in the composition of the loan portfolio and trends in past due and non-performing loan balances. The allowance for loan losses is a material estimate that is susceptible to significant fluctuation and is established through a provision for loan losses based on management’s evaluation of the inherent risk in the loan portfolio. In addition to extensive in-house loan monitoring procedures, the Company utilizes an outside party to conduct an independent loan review of all commercial loan and commercial real estate loan relationships that exceed $1.0 million of aggregate exposure over a twelve month period. Management utilizes the results of this outside loan review to assess the effectiveness of its internal loan grading system as well as to assist in the assessment of the overall adequacy of the allowance for loan losses associated with these types of loans.

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 incurred credit losses within the existing loan portfolio in the normal course of business. The allowance for loan loss is made up of two basic components. The first component is the specific allowance in which the Company sets aside reserves based on the analysis of individual credits that are cash flow dependent, yet there is a discount between the present value of the future cash flows and the carrying value. This was $1.3 million at March 31, 2014. The second component is the general reserve. The general reserve is used to record loan loss reserves for groups of homogenous loans in which the Company estimates the losses incurred in the portfolios based on quantitative and qualitative factors. Due to the uncertainty of risks in the loan portfolio, the Company’s judgment on the amount of the allowance necessary to absorb loans losses is approximate.

Due to regulatory guidance, the Company no longer carries specific reserves on collateral dependent loans, and instead charges off any shortfall. First Federal analyzes all loans on its classified and special mention lists at least quarterly and makes judgments about the risk of loss based on the cash flow of the borrower, the value of any collateral and the financial strength of any guarantor in determining the amount of impairment of individual loans and the charge off to be taken.

For purposes of the general reserve analysis, the loan portfolio is stratified into nine different loan pools based on loan type and by market area to allocate historic loss experience. The loss experience factor applied to the non-impaired loan portfolio was based upon historical losses of the most recent rolling twelve quarters ending March 31, 2014.

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The stratification of the loan portfolio resulted in a quantitative general allowance of $9.2 million at March 31, 2014 compared to $11.2 million at December 31, 2013. The decrease in the quantitative allowance was due to a decrease in the historical loss factors relating to commercial, commercial real estate, and residential loans.

In addition to the quantitative analysis, a qualitative analysis is performed each quarter to provide additional general reserves on the non-impaired loan portfolio for various factors. The overall qualitative factors are based on nine sub-factors. The nine sub-factors have been aggregated into three qualitative factors: economic, environment and risk.

ECONOMIC

1) Changes in international, national and local economic business conditions and developments, including the condition of various market segments.

2) Changes in the value of underlying collateral for collateral dependent loans.

ENVIRONMENT

3) Changes in the nature and volume in the loan portfolio.

4) The existence and effect of any concentrations of credit and changes in the level of such concentrations.

5) Changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices.

6) Changes in the quality and breadth of the loan review process.

7) Changes in the experience, ability and depth of lending management and staff.

RISK

8) Changes in the trends of the volume and severity of delinquent and classified loans, and changes in the volume of non-accrual loans, trouble debt restructuring, and other loan modifications.

9) Changes in the political and regulatory environment.

The qualitative analysis at March 31, 2014 indicated a general reserve of $14.3 million compared with $12.3 million at December 31, 2013. Management reviewed the overall economic, environmental and risk factors and determined that it was appropriate to increase several of these due in part to a regional economy hampered by severe winter weather conditions in the first quarter and reflecting overall mixed movements in unemployment rates in the Northwest Ohio and adjoining market counties in Indiana and Michigan, recent experience indicating continued declines in appraisal values for commercial real estate and other commercial asset collateral, and the continuation of higher interest rates since mid-2013. First Defiance’s general reserve percentages for main loan segments not otherwise classified ranged from 0.25% for construction loans to 1.71% for nonresidential real estate loans.

As a result of the quantitative and qualitative analyses, along with the change in specific reserves, the Company’s provision for loan losses for the first quarter of 2014 was $103,000, compared to $425,000 for the same period in 2013. The allowance for loan losses was $24.8 million and $25.0 million and represented 1.58% and 1.58% of loans, net of undisbursed loan funds and deferred fees and costs, as of March 31, 2014 and December 31, 2013, respectively. The provision of $103,000 was offset by charge offs of $1.2 million and recoveries of $906,000, resulting in a decrease to the overall allowance for loan loss of $167,000. In management’s opinion, the overall allowance for loan losses of $24.8 million as of March 31, 2014 is adequate.

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Management also assesses the value of real estate owned as of the end of each accounting period and recognizes write-downs to the value of that real estate in the income statement if conditions dictate. In the three month period ended March 31, 2014, First Defiance had no write-downs. Management believes that the values recorded at March 31, 2014 for real estate owned and repossessed assets represent the realizable value of such assets.

Total classified loans decreased to $51.3 million at March 31, 2014, compared to $55.6 million at December 31, 2013.

First Defiance’s ratio of allowance for loan losses to non-performing loans was 92.6% at March 31, 2014 compared with 89.6% at December 31, 2013. Management monitors collateral values of all loans included on the watch list that are collateral dependent and believes that allowances for those loans at March 31, 2014 are appropriate. Of the $26.8 million in non-accrual loans, $14.7 million or 54.9% are less than 90 days past due.

At March 31, 2014, First Defiance had total non-performing assets of $32.8 million, compared to $33.7 million at December 31, 2013. Non-performing assets include loans that are on non-accrual, real estate owned and other assets held for sale. Non-performing assets at March 31, 2014 and December 31, 2013 by category were as follows:

Table 1 – Nonperforming Asset

	March 31,			December 31,
	2014			2013
	(In Thousands)
Non-performing loans:
One to four family residential real estate	$	2,974		$	3,273
Non-residential and multi-family residential real estate		15,682			15,834
Commercial		7,723			8,327
Construction		-			-
Home equity and improvement		-			413
Consumer Finance		395			-
Total non-performing loans		26,774			27,847
Real estate owned		6,028			5,859
Other repossessed assets		-			-
Total repossessed assets	$	6,028			5,859
Total Nonperforming assets	$	32,802		$	33,706
Restructured loans, accruing	$	26,654		$	27,630
Total nonperforming assets as a percentage of total assets		1.52	%		1.58	%
Total nonperforming loans as a percentage of total loans*		1.71	%		1.76	%
Total nonperforming assets as a percentage of total loans plus REO*		2.09	%		2.12	%
Allowance for loan losses as a percent of total nonperforming assets		75.55	%		74.02	%

* Total loans are net of undisbursed loan funds and deferred fees and costs.

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The decrease in non-performing loans between December 31, 2013 and March 31, 2014 is primarily in commercial loans. The balance of this type of non-performing loan was $604,000 lower at March 31, 2014 compared to December 31, 2013.

Non-performing loans in the commercial loan category represented 2.03% of the total loans in those categories at March 31, 2014 compared to 2.14% for the same category at December 31, 2013. Management believes that the current allowance for loan losses is appropriate and that the provision for loan losses recorded in the first quarter of 2014 is consistent with both charge-off experience and the risk inherent in the overall credits in the portfolio.

First Federal’s Asset Review Committee meets monthly to review the status of work-out strategies for all criticized relationships, which 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 proposed charge-offs which are approved by the Senior Loan Committee or the Loan Loss Reserve Committee.

The following table details net charge-offs and nonaccrual loans by loan type. For the three months ended and as of March 31, 2014, commercial real estate, which represented 50.85% of total loans, accounted for (184.08)% of net charge-offs (recovery) and 58.57% of nonaccrual loans, and commercial loans, which represented 23.89% of total loans, accounted for 166.30% of net charge-offs and 28.84% of nonaccrual loans. For the three months ended and as of March 31, 2013, commercial real estate, which represented 52.74% of total loans, accounted for 24.37% of net charge-offs and 70.53% of nonaccrual loans, and commercial loans, which represented 24.04% of total loans, accounted for 19.05% of net charge-offs and 17.44% of nonaccrual loans.

Table 2 – Net Charge-offs and Non-accruals by Loan Type

	For the Three Months Ended March 31, 2014						As of March 31, 2014
	Net			% of Total Net			Nonaccrual		% of Total Non-
	Charge- offs(Recovery)			Charge-offs			Loans		Accrual Loans
	(In Thousands)						(In Thousands)
Residential	$	172			63.70	%	$	2,974		11.11	%
Construction		-			0.00	%		-		0.00	%
Commercial real estate		(497	)		(184.08	)%		15,682		58.57	%
Commercial		449			166.30	%		7,723		28.84	%
Consumer		(7	)		(2.59	)%		-		0.00	%
Home equity and improvement		153			56.67	%		395		1.48	%
Total	$	270			100.00	%	$	26,774		100.00	%

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	For the Three Months Ended March 31, 2013					As of March 31, 2013
	Net		% of Total Net			Nonaccrual		% of Total Non-
	Charge-offs		Charge-offs			Loans		Accrual Loans
	(In Thousands)					(In Thousands)
Residential	$	107		15.81	%	$	4,163		11.80	%
Construction		-		0.00	%		-		0.00	%
Commercial real estate		165		24.37	%		24,884		70.53	%
Commercial		129		19.05	%		6,152		17.44	%
Consumer		27		3.99	%		-		0.00	%
Home equity and improvement		249		36.78	%		84		0.23	%
Total	$	677		100.00	%	$	35,283		100.00	%

Table 3 – Allowance for Loan Loss Activity

	For the Quarter Ended
	1st 2014		4th 2013		3rd 2013		2nd 2013		1st 2013
	(In Thousands)
Allowance at beginning of period	$	24,950	$	25,964	$	26,270	$	26,459	$	26,711
Provision for credit losses		103		475		476		448		425
Charge-offs:
Residential		228		175		78		184		206
Commercial real estate		228		1,097		829		283		266
Commercial		525		670		39		316		205
Consumer finance		11		7		33		8		46
Home equity and improvement		184		144		170		170		272
Total charge-offs		1,176		2,093		1,149		961		995
Recoveries		906		604		367		324		318
Net charge-offs		270		1,489		782		637		677
Ending allowance	$	24,783	$	24,950	$	25,964	$	26,270	$	26,459

The following table sets forth information concerning the allocation of First Federal’s allowance for loan losses by loan categories at the dates indicated.

Table 4 – Allowance for Loan Loss Allocation by Loan Category

	March 31, 2014					December 31, 2013					September 30, 2013					June 30, 2013					March 31, 2013
			Percent of					Percent of					Percent of					Percent of					Percent of
			total loans					total loans					total loans					total loans					total loans
	Amount		by category			Amount		by category			Amount		by category			Amount		by category			Amount		by category
	(Dollars In Thousands)
Residential	$	2,639		12.38	%	$	2,847		12.13	%	$	2,798		12.14	%	$	3,197		12.47	%	$	3,433		13.00	%
Construction		138		5.15	%		134		5.33	%		119		3.77	%		83		2.63	%		67		2.20	%
Commercial real estate		14,602		50.85	%		14,508		50.80	%		15,616		51.93	%		15,565		51.98	%		15,777		52.74	%
Commercial		5,610		23.89	%		5,678		24.06	%		5,546		24.42	%		5,474		25.10	%		5,304		24.04	%
Consumer		147		1.03	%		148		1.05	%		162		1.05	%		165		1.07	%		155		1.02	%
Home equity and improvement		1,647		6.70	%		1,635		6.63	%		1,723		6.69	%		1,786		6.75	%		1,723		7.00	%
	$	24,783		100.00	%	$	24,950		100.00	%	$	25,964		100.00	%	$	26,270		100.00	%	$	26,459		100.00	%

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Key Asset Quality Ratio Trends

Table 5 – Key Asset Quality Ratio Trends

	1st Qtr 2014			4th Qtr 2013			3rd Qtr 2013			2nd Qtr2013			1st Qtr 2013
Allowance for loan losses / loans*		1.58	%		1.58	%		1.66	%		1.68	%		1.76	%
Allowance for loan losses to net charge-offs		9178.89	%		1675.62	%		3320.20	%		4124.02	%		3908.27	%
Allowance for loan losses / non-performing assets		75.55	%		74.02	%		72.06	%		74.64	%		66.82	%
Allowance for loan losses / non-performing loans		92.56	%		89.60	%		85.09	%		91.69	%		74.99	%
Non-performing assets / loans plus REO*		2.09	%		2.12	%		2.30	%		2.24	%		2.62	%
Non-performing assets / total assets		1.52	%		1.58	%		1.75	%		1.70	%		1.94	%
Net charge-offs / average loans (annualized)		0.07	%		0.39	%		0.20	%		0.17	%		0.18	%

* Total loans are net of undisbursed funds and deferred fees and costs.

Non-Interest Income.

Total non-interest income decreased $1.7 million in the first quarter of 2014 to $7.3 million from $9.0 million for the same period in 2013.

Service Fees. Service fees and other charges decreased by $61,000 or 2.6% in the first quarter of 2014 compared to the same period in 2013.

First Federal’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, an online banking or voice-response transfer, or an ATM. To be in good standing, an account must be brought to a positive balance within a 30-day period and have not excessively used the overdraft privilege program. 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 that are overdrawn for 30 or more days. Consumer accounts overdrawn for more than 60 days are automatically charged off. Fees are charged as a one-time fee per occurrence, up to five charges per day, 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.

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 deemed to be noninterest income rather than interest income. Fee income recorded for the quarters ending March 31, 2014 and 2013 related to the overdraft privilege product, net of adjustments to the allowance for uncollectible overdrafts, were $699,000 and $865,000, respectively. Accounts charged off are included in noninterest expense. The allowance for uncollectible overdrafts was $8,000 at March 31, 2014, $22,000 at December 31, 2013 and $6,000 at March 31, 2013.

60

Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage loans decreased $1.6 million to $1.2 million for the first quarter of 2014 compared to $2.8 million for the same period of 2013. The slight rise in the long term rates and the harsher weather conditions contributed to the reduction in mortgage banking activity in the first quarter 2014. Gains realized from the sale of mortgage loans decreased in the first quarter of 2014 to $641,000 from $2.2 million in the first quarter of 2013. The amortization of mortgage servicing rights expense decreased $396,000 to $292,000 in the first quarter of 2014 compared to $689,000 in the same period in 2013. The Company recorded a negative valuation adjustment of $7,000 on mortgage servicing rights in the first quarter of 2014 compared to a positive valuation adjustment of $473,000 in the first quarter of 2013. The negative valuation adjustment in the first quarter of 2014 was driven by a decrease in the fair values of certain sectors of the Company’s portfolio of mortgage servicing rights.

Insurance and Investment Sales Commissions. Income from the sale of insurance and investment products remained flat at $3.0 million in the first quarter of 2014 and 2013. First Defiance’s insurance subsidiary, First Insurance, 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 the first quarter of 2014, First Insurance earned $878,000 of contingent income compared to $944,000 for the first quarter of 2013.

Non-Interest Expense.

Non-interest expense decreased to $16.7 million for the first quarter of 2014 compared to $17.2 million for the same period in 2013.

Compensation and Benefits. Compensation and benefits decreased to $8.5 million for the quarter ended March 31, 2014 from $8.8 million for the same period in 2013. The decrease is mainly attributable to accruals for incentive payments based on meeting performance targets were lower in the first quarter of 2014 compared to the same period in 2013.

FDIC Insurance Premium. FDIC costs decreased $271,000 to $385,000 in the first quarter of 2014 from $656,000 for the same period of 2013 due to the improvement in the Company’s risk category.

Other Non-Interest Expenses. Other non-interest expenses increased $57,000 to $4.1 million for the quarter ended March 31, 2014 from $4.0 million for the same period in 2013. Included in the first quarter of 2014 is $786,000 of cost associated with the termination of First Federal’s merger agreement with First Community Bank and in an increase in management consulting by $248,000. This was offset by a decrease in credit, collection and REO expense of $456,000 and a decrease in secondary market buy-back losses of $556,000.

The efficiency ratio, considering tax equivalent interest income and excluding securities gains and losses, for the first quarter of 2014 was 67.87% compared to 66.55% for the first quarter of 2013.

61

Income Taxes.

First Defiance computes federal income tax expense in accordance with ASC Topic 740, Subtopic 942, which resulted in an effective tax rate of 29.61% for the quarter ended March 31, 2014 compared to 29.32% for the same period in 2013. The tax rate is lower than the statutory 35% tax rate for the Company mainly because of investments in tax-exempt securities. The earnings on tax-exempt securities are not subject to federal income tax.

Liquidity

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

First Defiance had $5.3 million of cash provided by operating activities during the first three months of 2014. The Company's cash used in operating activities resulted from the origination of loans held for sale mostly offset by the proceeds on the sale of loans.

At March 31, 2014, First Federal had $87.9 million in outstanding loan commitments and loans in process to be funded generally within the next six months and an additional $302.7 million committed under existing consumer and commercial lines of credit and standby letters of credit. Also at that date, First Federal had commitments to sell $14.8 million of loans held-for-sale. First Defiance believes that it has adequate resources to fund commitments as 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.

Liquidity risk arises from the possibility that the Company may not be able to meet its financial obligations and operating cash needs or may become overly reliant upon external funding sources. In order to manage this risk, the Company’s Board of Directors has established a Liquidity Policy that identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity and quantifies minimum liquidity requirements. This policy designates First Federal’s Asset/Liability Committee (“ALCO”) as the body responsible for meeting these objectives. The ALCO reviews liquidity on a monthly basis and approves significant changes in strategies that affect balance sheet or cash flow positions. Liquidity is centrally managed on a daily basis by the Company’s Chief Financial Officer and Controller.

Capital Resources

Capital is managed at First Federal and on a consolidated basis. Capital levels are maintained based on regulatory capital requirements and the economic capital required to support credit, market, liquidity and operational risks inherent in our business, as well as flexibility needed for future growth and new business opportunities.

First Federal is required to maintain specified amounts of capital pursuant to regulations promulgated by the Office of the Comptroller of the Currency. 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 March 31, 2014: (In Thousands)

62

	Actual					Minimum Required for Adequately Capitalized					Minimum Required for Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 Capital (1)
Consolidated	$	248,241		11.82	%	$	83,980		4.0	%		N/A		N/A
First Federal Bank	$	237,253		11.32	%	$	83,829		4.0	%	$	104,786		5.0	%
Tier 1 Capital (to Risk Weighted Assets) (1)
Consolidated	$	248,241		14.40	%	$	68,952		4.0	%		N/A		N/A
First Federal Bank	$	237,253		13.77	%	$	68,899		4.0	%	$	103,348		6.0	%
Total Capital (to Risk Weighted Assets) (1)
Consolidated	$	269,829		15.65	%	$	137,905		8.0	%		N/A		N/A
First Federal Bank	$	258,824		15.03	%	$	137,798		8.0	%	$	172,247		10.0	%

(1) Core capital is computed as a percentage of adjusted total assets of $2.10 billion and $2.10 billion for consolidated and the bank, respectively. Risk-based capital is computed as a percentage of total risk-weighted assets of $1.72 billion and $1.72 billion for consolidated and the bank, respectively.

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, Valuation of Securities, Goodwill, 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 three months of 2014.

63

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As discussed in detail in the Annual Report on Form 10-K for the year ended December 31, 2013, 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 that measures the impact changes in interest rates can have on net interest income. The 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 100 basis points over a 24 month period, using March 31, 2014 amounts as a base case, First Defiance’s net interest income would be impacted by less than the board mandated guidelines of 10%.

In addition to the simulation analysis, First Defiance also uses an economic value of equity (“EVE”) analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining life of all balance sheet positions. The EVE analysis generally calculates the net present value of First Federal’s assets and liabilities in rate shock environments that range from -400 basis points to +400 basis points. However, the likelihood of a decrease in rates beyond 100 basis points as of March 31, 2014 was considered to be remote given the current interest rate environment and therefore, was not included in this analysis. The results of this analysis are reflected in the following tables for the three months ended March 31, 2014 and the year-ended December 31, 2013.

March 31, 2014
Economic Value of Equity
Change in Rates	$ Amount		$ Change			% Change
	(Dollars in Thousands)
+400 bp		474,051		43,835			10.19	%
+ 300 bp		467,150		36,934			8.58	%
+ 200 bp		457,983		27,767			6.45	%
+ 100 bp		446,220		16,004			3.72	%
0 bp		430,216		–			–
- 100 bp		409,582		(20,634	)		(4.80	)%

December 31, 2013
Economic Value of Equity
Change in Rates	$ Amount		$ Change			% Change
	(Dollars in Thousands)
+400 bp		474,469		41,679			9.63	%
+ 300 bp		467,691		34,901			8.06	%
+ 200 bp		458,844		26,054			6.02	%
+ 100 bp		447,701		14,911			3.45	%
0 bp		432,790		-			-
- 100 bp		413,917		(18,873	)		(4.36	)%

64

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.

An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2014. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

No changes occurred in the Company’s internal controls over financial reporting during the quarter ended March 31, 2014 that materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

65

FIRST DEFIANCE FINANCIAL CORP.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

Neither First Defiance nor any of its subsidiaries is engaged in any legal proceedings of a material nature.

Item 1A. Risk Factors

There are no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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

The following table provides information regarding First Defiance’s purchases of its common stock during the three-month period ended March 31, 2014:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (2)
Beginning Balance, December 31, 2013								418,034
January 1 – January 31, 2014		11,984	$	25.90		11,984		406,050
February 1 – February 28, 2014		66,988		25.82		66,988		339,062
March 1 – March 31, 2014		-		-		-		339,062
Total		78,972	$	25.83		78,972		339,062

(1) The reported shares were repurchased pursuant to First Defiance’s publicly announced stock repurchase program, which became effective September 30, 2013. Up to 489,000 shares were authorized to be purchased under the program. There is no expiration date for the program.

(2) The number of shares shown represents, as of the end of each period, the maximum number of shares of common stock that may yet be purchased under publicly announced stock repurchase programs. The shares may be purchased, from time to time, depending on market conditions.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

66

Item 6. Exhibits

Exhibit 3.1	Articles of Incorporation (1)
Exhibit 3.2	Code of Regulations (1)
Exhibit 3.3	Amendment to Articles of Incorporation (2)
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 is formatted in eXtensible Business Reporting Language (“XBRL”): (i) Unaudited Consolidated Condensed Balance Sheet at March 31, 2014 and December 31, 2013, (ii) Unaudited Consolidated Condensed Statements of Income for the Three Months ended March 31, 2014 and 2013 (iii) Unaudited Consolidated Condensed Statements of Comprehensive Income for the Three Months ended March 31, 2014 and 2013, (iv) Unaudited Consolidated Condensed Statements of Changes in Stockholder’ Equity for the Three Months ended March 31, 2014 and 2013, (v) Unaudited Consolidated Condensed Statements of Cash Flows for the Three Months ended March 31, 2014 and 2013 and (vi) Notes to Unaudited Consolidated Condensed Financial Statements.

(1) Incorporated herein by reference to the like numbered exhibit in the Registrant’s Form S-1 (File No. 33-93354)

(2) Incorporated herein by reference to exhibit 3 in Form 8-K filed December 8, 2008 (Film No. 081236105)

67

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 on its behalf by the undersigned thereunto duly authorized.

First Defiance Financial Corp.

(Registrant)

Date:  May 8, 2014	By:	/s/ Donald P. Hileman
		Donald P. Hileman
		President and
		Chief Executive Officer

Date:  May 8, 2014	By:	/s/ Kevin T. Thompson
		Kevin T. Thompson
		Executive Vice President and
		Chief Financial Officer

68

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Donald P. Hileman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Defiance Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  May 8, 2014	/s/ Donald P. Hileman
	Donald P. Hileman
	President and
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Kevin T. Thompson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Defiance Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  May 8, 2014	/s/ Kevin T. Thompson
	Kevin T. Thompson
	Executive Vice President and
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Defiance Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald P. Hileman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the Company's financial condition and results of operations.

Date: May 8, 2014	/s/ Donald P. Hileman
	Donald P. Hileman
	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Defiance Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin T. Thompson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

1. The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the Company's financial condition and results of operations.

Date: May 8, 2014	/s/ Kevin T. Thompson
	Kevin T. Thompson
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Fair Value (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Impaired loans
Total impaired loans	$ 10,117	$ 10,718
Mortgage servicing rights	1,255	1,370
Real estate held for sale
Total Real Estate held for sale		1,390
One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	436	259
Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	320	338
Commercial Real Estate [Member]
Impaired loans
Total impaired loans	7,561	9,590
Home Equity and Home Improvement [Member]
Impaired loans
Total impaired loans		531
Residential Mortgage [Member]
Real estate held for sale
Total Real Estate held for sale		112
Commercial Loan [Member]
Impaired loans
Total impaired loans	1,800
Real estate held for sale
Total Real Estate held for sale		1,278
Fair Value, Inputs, Level 1 [Member]
Impaired loans
Total impaired loans	0	0
Mortgage servicing rights	0	0
Real estate held for sale
Total Real Estate held for sale		0
Fair Value, Inputs, Level 1 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Home Equity and Home Improvement [Member]
Impaired loans
Total impaired loans		0
Fair Value, Inputs, Level 1 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total Real Estate held for sale		0
Fair Value, Inputs, Level 1 [Member] | Commercial Loan [Member]
Impaired loans
Total impaired loans	0
Real estate held for sale
Total Real Estate held for sale		0
Fair Value, Inputs, Level 2 [Member]
Impaired loans
Total impaired loans	0	0
Mortgage servicing rights	1,255	1,370
Real estate held for sale
Total Real Estate held for sale		0
Fair Value, Inputs, Level 2 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Home Equity and Home Improvement [Member]
Impaired loans
Total impaired loans		0
Fair Value, Inputs, Level 2 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total Real Estate held for sale		0
Fair Value, Inputs, Level 2 [Member] | Commercial Loan [Member]
Impaired loans
Total impaired loans	0
Real estate held for sale
Total Real Estate held for sale		0
Fair Value, Inputs, Level 3 [Member]
Impaired loans
Total impaired loans	10,117	10,718
Mortgage servicing rights	0	0
Real estate held for sale
Total Real Estate held for sale		1,390
Fair Value, Inputs, Level 3 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	436	259
Fair Value, Inputs, Level 3 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	320	338
Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	7,561	9,590
Fair Value, Inputs, Level 3 [Member] | Home Equity and Home Improvement [Member]
Impaired loans
Total impaired loans		531
Fair Value, Inputs, Level 3 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total Real Estate held for sale		112
Fair Value, Inputs, Level 3 [Member] | Commercial Loan [Member]
Impaired loans
Total impaired loans	1,800
Real estate held for sale
Total Real Estate held for sale		$ 1,278

XML

Investment Securities (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Investment Securities [Line Items]
Proceeds	$ 1,654	$ 1,019
Gross realized gains	0	53
Gross realized losses	$ 0	$ 0

XML

Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Common Share [Line Items]
Numerator for basic and diluted earnings per common share - Net income applicable to common shares (in dollars)	$ 5,179	$ 5,559
Denominator:
Denominator for basic earnings per common share - weighted average common shares	9,681	9,736
Effect of warrants	341	295
Effect of employee stock options	86	74
Denominator for diluted earnings per common share (in shares)	10,108	10,105
Basic earnings per common share (in dollars per share)	$ 0.53	$ 0.57
Diluted earnings per common share (in dollars per share)	$ 0.51	$ 0.55

XML

Deposits (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Deposits [Line Items]
Non-interest-bearing checking accounts	$ 338,412	$ 348,943
Interest-bearing checking and money market accounts	740,783	715,939
Savings deposits	199,361	185,121
Retail certificates of deposit less than $100,000	309,758	313,335
Retail certificates of deposit greater than $100,000	172,303	172,454
Total	$ 1,760,617	$ 1,735,792

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Investment Securities (Details Textual) (USD $)	3 Months Ended		3 Months Ended	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2014	Mar. 31, 2014 Collateralized Debt Obligations [Member]	Dec. 31, 2013 Collateralized Debt Obligations [Member]	Mar. 31, 2014 Four Collateralized Debt Obligations [Member]
Investment Securities [Line Items]
Security Owned and Pledged as Collateral Carrying Value		$ 137,800,000
Investment Portfolio, Number of Securities		347
Investment Portfolio, Number of Securities, Unrealized Loss		78
Realized Investment Gains (Losses)	53,000
Realized Investment Gains Losses, Net of Tax	37,000
Collateralized Debt Obligations, Recognized Other than Temporary Impairment					1,600,000
Other Comprehensive Income (Loss), before Tax			$ 566,000	$ 645,000

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Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Securities available for sale and transferred securities: Before Tax Amount
Change in net unrealized gain/loss during the period	$ 1,723		$ (664)
Reclassification adjustment for net (gains) losses included in net income, Before Tax Amount	0	[1]	(53)	[1]
Total other comprehensive income (loss), Before Tax Amount	1,723		(717)
Securities available for sale and transferred securities: Tax Expense (Benefit)
Change in net unrealized gain/loss during the period, Tax Expense (Benefit)	603		(235)
Reclassification adjustment for net (gains) losses included in net income, Tax Expense (Benefit)	0		(16)
Total other comprehensive income (loss), Tax Expense (Benefit)	603		(251)
Securities available for sale and transferred securities: Net of Tax Amount
Change in net unrealized gain/loss during the period, Net of Tax Amount	1,120		(429)
Reclassification adjustment for net (gains) losses included in net income, Net of Tax Amount	0		(37)
Total other comprehensive income (loss), Net of Tax Amount	$ 1,120		$ (466)

[1] Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended March 31, 2014 and 2013 was $0 and $13, respectively.

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Stock Compensation Plans (Details Textual) (USD $)	3 Months Ended			3 Months Ended			3 Months Ended		12 Months Ended		3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Mar. 31, 2014 Short-term Equity Incentive Plan 2013 [Member]	Mar. 31, 2014 Equity Plan 2010 [Member]	Mar. 15, 2010 Equity Plan 2010 [Member]	Mar. 31, 2014 Long-term Equity Incentive Plan 2013 [Member]	Mar. 31, 2014 Restricted Stock Units (Rsus) [Member]	Dec. 31, 2013 Restricted Stock Units (Rsus) [Member]		Mar. 31, 2014 Stock Option Grant, 2009 [Member]	Mar. 31, 2014 Stock Option Grant, 2011 [Member]	Mar. 31, 2014 Stock Option Grant, Annual [Member]	Mar. 31, 2014 Short-term Equity Incentive Plan 2014 [Member]	Mar. 31, 2014 Long-term Equity Incentive Plan 2014 [Member]	Mar. 31, 2014 Short-term and Long-term Equity Incentive Plan 2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized						350,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	240,420		251,020
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Vested Percentage, Year											20.00%	40.00%	20.00%		100.00%
Stock Option Period, Description					All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate, Range Minimum				25.00%			25.00%							30.00%	20.00%
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate, Range Maximum				45.00%			45.00%							45.00%	45.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								30,538	86,065	[1]
Option Subscription, Description							The amount of benefit under the 2013 LTIP will be determined individually at the 12 month period ending December 31, 2013, the 24 month period ending December 31, 2014 and the 36 month period ending December31, 2015. The awards vesting will be as follows: 16.7% of the target award after the end of the performance period ending December 31, 2013, 27.8% of the target award at the end of the performance period ending December 31, 2014 and 55.5% of the target award at the end of the performance period ending December 31, 2015. The benefits earned under the 2013 LTIP Plan will be paid out in equity in the first quarter following the close of the applicable performance period. The participants are required to be employed on the day of payout in order to receive such payment.
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options	$ 7,000
Employee Service Share Based Compensation Nonvested Awards, Total Compensation Cost Not Yet Recognized, Period For Recognition (in years)	4 years 1 month 6 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	99,132							99,132	106,061
Allocated Share-based Compensation Expense	45,000	273,000														255,000
Compensation Expense, Maximum	3,800,000
Estimated Compensation Expense, Excepted	2,200,000
Unrecognized Compensation Expense	$ 1,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 11.25	$ 0

[1] Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended March 31, 2014 and 2013 was $0 and $13, respectively.

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Borrowings (Tables)

3 Months Ended

Mar. 31, 2014

Subordinated Borrowings [Abstract]

Federal Home Loan Bank Advances Disclosure [Table Text Block]

First Defiance’s debt, FHLB advances and junior subordinated debentures owed to unconsolidated subsidiary trusts are comprised of the following:

	March 31,		December 31,
	2014		2013
	(In Thousands)
FHLB Advances:
Putable advances	$	12,000	$	12,000
Amortizable mortgage advances		10,278		10,520
Total	$	22,278	$	22,520
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

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Other Comprehensive Income (Loss) (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Securities Available For Sale, Beginning balance	$ 906	$ 4,851
Securities Available For Sale, Other comprehensive loss before reclassifications	1,120	(429)
Securities Available For Sale, Amounts reclassified from accumulated other comprehensive loss	0	(37)
Securities Available For Sale, Net other comprehensive loss during period	1,120	(466)
Securities Available For Sale, Ending balance	2,026	4,385
Post-retirement Benefit, Beginning balance	(361)	(577)
Post-retirement Benefit, Other comprehensive loss before reclassifications	0	0
Post-retirement Benefit, Amounts reclassified from accumulated other comprehensive loss	0	0
Post-retirement Benefit, Net other comprehensive loss during period	0	0
Post-retirement Benefit, Ending balance	(361)	(577)
Accumulated Other Comprehensive Income, Beginning balance	545	4,274
Accumulated Other Comprehensive Income, Other comprehensive loss before reclassifications	1,120	(429)
Accumulated Other Comprehensive Income, Amounts reclassified from accumulated other comprehensive loss	0	(37)
Accumulated Other Comprehensive Income, Net other comprehensive loss during period	1,120	(466)
Accumulated Other Comprehensive Income, Ending balance	$ 1,665	$ 3,808

XML

Commitments, Guarantees and Contingent Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Loss Contingencies [Line Items]
Fixed Rate, Commitments to make loans	$ 35,915	$ 57,914
Fixed Rate, Unused lines of credit	16,958	18,048
Fixed Rate, Standby letters of credit	0	0
Fixed Rate, Total	52,873	75,962
Variable Rate, Commitments to make loans	51,951	59,632
Variable Rate, Unused lines of credit	267,666	257,939
Variable Rate, Standby letters of credit	18,052	17,680
Variable Rate, Total	$ 337,669	$ 335,251

XML

Loans (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	$ 24,950	$ 26,711
Charge-Offs	(1,176)	(995)
Recoveries	906	318
Provisions	103	425
Ending Allowance	24,783	26,459
One to Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,847	3,506
Charge-Offs	(228)	(206)
Recoveries	56	99
Provisions	(36)	34
Ending Allowance	2,639	3,433
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,508	2,197
Charge-Offs	0	0
Recoveries	3	0
Provisions	104	213
Ending Allowance	2,615	2,410
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	12,000	12,702
Charge-Offs	(228)	(266)
Recoveries	722	101
Provisions	(507)	830
Ending Allowance	11,987	13,367
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	134	75
Charge-Offs	0	0
Recoveries	0	0
Provisions	4	(8)
Ending Allowance	138	67
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	5,678	6,325
Charge-Offs	(525)	(205)
Recoveries	76	76
Provisions	381	(892)
Ending Allowance	5,610	5,304
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	1,635	1,759
Charge-Offs	(184)	(272)
Recoveries	31	23
Provisions	165	213
Ending Allowance	1,647	1,723
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	148	147
Charge-Offs	(11)	(46)
Recoveries	18	19
Provisions	(8)	35
Ending Allowance	$ 147	$ 155

XML

Derivative Financial Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives - Gain (Loss)	$ 50	$ (161)

XML

Derivative Financial Instruments (Details Textual) (USD $) In Millions, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Derivative Instruments Not Designated as Hedging Instruments at Fair Value, Net	$ 10.7	$ 7.5
Notional Amount of Interest Rate Derivative Instruments Not Designated as Hedging Instruments	$ 14.8	$ 12.1

XML

Borrowings (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
FHLB Advances:
Putable advances	$ 12,000	$ 12,000
Amortizable mortgage advances	10,278	10,520
Totals	22,278	22,520
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$ 36,083	$ 36,083

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant areas where First Defiance uses estimates are the valuation of certain investment securities, the determination of the allowance for loan losses, the valuation of mortgage servicing rights and goodwill, the determination of unrecognized income tax benefits, and the fair value of financial instruments.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for the calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options, warrants, restricted stock awards and stock grants.

New Accounting Pronouncements, Policy [Policy Text Block]

Newly Issued but Not Yet Effective Accounting Standards

In January 2014, the FASB issued ASU 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of the amendments in ASU 2014-04 to Topic 310, “Receivables - Troubled Debt Restructurings by Creditors,” is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. An entity can elect to adopt the amendments using either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

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Investment Securities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2014		Dec. 31, 2013
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	$ 206,205		$ 196,777
Available-for-Sale Securities, Gross Unrealized Gains	5,899		5,020
Available-for-Sale Securities, Gross Unrealized Losses	(2,783)		(3,627)
Available-for-Sale Securities, Fair Value	209,321		198,170
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	378	[1]	387	[1]
Held-to-Maturity Securities, Gross Unrealized Gains	5	[1]	6
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	383	[1]	393	[1]
US Government Corporations and Agencies Securities [Member]
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	5,000		5,000
Available-for-Sale Securities, Gross Unrealized Gains	0		0
Available-for-Sale Securities, Gross Unrealized Losses	(55)		(79)
Available-for-Sale Securities, Fair Value	4,945		4,921
Residential Mortgage Backed Securities [Member]
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	42,183		41,368
Available-for-Sale Securities, Gross Unrealized Gains	772		765
Available-for-Sale Securities, Gross Unrealized Losses	(661)		(841)
Available-for-Sale Securities, Fair Value	42,294		41,292
Real Estate Mortgage Investment Conduits [Member]
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	1,998
Available-for-Sale Securities, Gross Unrealized Gains	0
Available-for-Sale Securities, Gross Unrealized Losses	(13)
Available-for-Sale Securities, Fair Value	1,985
Collateralized Mortgage Backed Securities [Member]
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	67,721		59,865
Available-for-Sale Securities, Gross Unrealized Gains	766		739
Available-for-Sale Securities, Gross Unrealized Losses	(712)		(763)
Available-for-Sale Securities, Fair Value	67,775		59,841
Trust Preferred Securities and Preferred Stock [Member]
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	1,610		3,264
Available-for-Sale Securities, Gross Unrealized Gains	845		683
Available-for-Sale Securities, Gross Unrealized Losses	(871)		(993)
Available-for-Sale Securities, Fair Value	1,584		2,954
Corporate Bond Securities [Member]
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	6,869		8,854
Available-for-Sale Securities, Gross Unrealized Gains	121		129
Available-for-Sale Securities, Gross Unrealized Losses	(29)		(41)
Available-for-Sale Securities, Fair Value	6,961		8,942
US States and Political Subdivisions Debt Securities [Member]
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost	80,824		78,426
Available-for-Sale Securities, Gross Unrealized Gains	3,395		2,704
Available-for-Sale Securities, Gross Unrealized Losses	(442)		(910)
Available-for-Sale Securities, Fair Value	83,777		80,220
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	186	[1]	186	[1]
Held-to-Maturity Securities, Gross Unrealized Gains	0	[1]	0
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	186	[1]	186	[1]
Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member]
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	30	[1]	31	[1]
Held-to-Maturity Securities, Gross Unrealized Gains	0	[1]	0
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	30	[1]	31	[1]
Federal National Mortgage Association Certificates and Obligations (FNMA) [Member]
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	115	[1]	120	[1]
Held-to-Maturity Securities, Gross Unrealized Gains	3	[1]	4
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	118	[1]	124	[1]
Government National Mortgage Association Certificates and Obligations (GNMA) [Member]
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	47	[1]	50	[1]
Held-to-Maturity Securities, Gross Unrealized Gains	2	[1]	2
Held-to-Maturity Securities, Gross Unrealized Losses	0	[1]	0
Held-to-Maturity Securities, Fair Value	$ 49	[1]	$ 52	[1]

[1] FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

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Fair Value (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Impaired Financing Receivable, Recorded Investment	$ 10,117,000		$ 10,718,000
Impaired Financing Receivables, Provisional Expenses	756,000	621,000
Mortgage Servicing Rights at Fair Value	1,255,000		1,370,000
Valuation Allowance of Mortgage Servicing Rights	1,000,000		1,000,000
Proceeds from Collection of Loans Receivable	473,000	473,000
Charge of Mortgage Servicing Rights	$ 7,000	$ 7,000
Minimum [Member] | Real Estate held for sale [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Fair Value Inputs, Discount Rate	0.00%
Maximum [Member] | Real Estate held for sale [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Fair Value Inputs, Discount Rate	20.00%

XML

Derivative Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives Assets, Carrying Value	$ 345	$ 295
Mortgage Banking Derivatives Liabilities, Carrying Value	0	0
Mortgage Banking Derivatives, Net Carrying Value	$ 345	$ 295

XML

Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Available for sale securities:
Available for sale securities, Total Fair Value	$ 209,321	$ 198,170
US Government Corporations and Agencies Securities [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	4,945	4,921
US Government Corporations and Agencies Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
US Government Corporations and Agencies Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	4,945	4,921
US Government Corporations and Agencies Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Residential Mortgage Backed Securities [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	42,294	41,292
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	42,294	41,292
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Remics [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1,985
Remics [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0
Remics [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1,985
Remics [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0
Collateralized Mortgage Backed Securities [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	67,775	59,841
Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	67,775	59,841
Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Trust Preferred Stock [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	704	2,236
Trust Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	1,654
Trust Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Trust Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	704	582
Preferred Stock [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	880	718
Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	880	718
Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Corporate Bond Securities [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	6,961	8,942
Corporate Bond Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Corporate Bond Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	6,961	8,942
Corporate Bond Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
US States and Political Subdivisions Debt Securities [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	83,777	80,220
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	83,777	80,220
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0
Mortgage Banking Derivative Asset [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	345	295
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	345	295
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Liability [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	$ 0	$ 0

XML

Investment Securities (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	$ 65,860	$ 78,465
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(1,465)	(2,595)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	14,975	957
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(1,318)	(1,032)
Available-for-sale securities, Total, Fair Value	80,835	79,422
Available-for-sale securities, Total, Unrealized Loss	(2,783)	(3,627)
Us Government Corporations and Agencies Securities [Member]
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	1,994	4,921
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(6)	(79)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	2,951	0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(49)	0
Available-for-sale securities, Total, Fair Value	4,945	4,921
Available-for-sale securities, Total, Unrealized Loss	(55)	(79)
Residential Mortgage Backed Securities [Member]
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	20,869	24,846
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(591)	(841)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	1,834	0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(70)	0
Available-for-sale securities, Total, Fair Value	22,703	24,846
Available-for-sale securities, Total, Unrealized Loss	(661)	(841)
Collateralized Mortgage Obligations [Member]
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	31,762	26,530
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(571)	(763)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	1,714	0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(141)	0
Available-for-sale securities, Total, Fair Value	33,476	26,530
Available-for-sale securities, Total, Unrealized Loss	(712)	(763)
Corporate Bond Securities [Member]
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	0	2,959
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	0	(41)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	2,971	0
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(29)	0
Available-for-sale securities, Total, Fair Value	2,971	2,959
Available-for-sale securities, Total, Unrealized Loss	(29)	(41)
Trust Preferred Securities and Preferred Stock [Member]
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	0	0
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	0	0
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	704	582
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(871)	(993)
Available-for-sale securities, Total, Fair Value	704	582
Available-for-sale securities, Total, Unrealized Loss	(871)	(993)
US States and Political Subdivisions Debt Securities [Member]
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	11,235	19,209
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(297)	(871)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	2,816	375
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(145)	(39)
Available-for-sale securities, Total, Fair Value	14,051	19,584
Available-for-sale securities, Total, Unrealized Loss	(442)	(910)
Remics [Member]
Investment Securities [Line Items]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	0
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	0
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	1,985
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(13)
Available-for-sale securities, Total, Fair Value	1,985
Available-for-sale securities, Total, Unrealized Loss	$ (13)

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Mortgage Banking (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items]
Gain from sale of mortgage loans	$ 641	$ 2,176
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue	905	870
Amortization of mortgage servicing rights	(292)	(689)
Mortgage servicing rights valuation adjustments	(7)	473
Mortgage loans servicing revenue (expense), Total	606	654
Net revenue from sale and servicing of mortgage loans	$ 1,247	$ 2,830

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Loans (Details 5) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 26,774	$ 27,847
Loans over 90 days past due and still accruing	0	0
Total non-performing loans	26,774	27,847
Real estate and other assets held for sale	6,028	5,859
Total non-performing assets	32,802	33,706
Troubled debt restructuring, still accruing	$ 26,654	$ 27,630

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Dividends on Common Stock (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Dividends on Common Stock [Line Items]
Common Stock, Dividends, Per Share, Cash Paid	$ 0.15	$ 0.10

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Basis of Presentation

3 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Basis of Presentation

First Defiance Financial Corp. (“First Defiance” or the “Company”) is a unitary thrift holding company that, through its subsidiaries, First Federal Bank of the Midwest (“First Federal”), First Insurance Group of the Midwest, Inc. (“First Insurance”), and First Defiance Risk Management Inc. (collectively, the Subsidiaries”), focuses on traditional banking and property and casualty, life and group health insurance products. All significant intercompany transactions and balances are eliminated in consolidation.

First Federal is primarily engaged in community banking attracting deposits from the general public and using those and other available sources of funds to originate loans primarily in the counties in which its offices are located. First Federal’s traditional banking activities include originating and servicing residential, non-residential real estate, commercial, home improvement and home equity and consumer loans and providing a broad range of depository, trust and wealth management services. First Insurance is an insurance agency that does business in the Defiance, Bryan, Bowling Green, Maumee and Oregon, Ohio areas, offering property and casualty, group health insurance and life insurance products. First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company to insure the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

The consolidated condensed statement of financial condition at December 31, 2013 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 March 31, 2014 and for the three month periods ended March 31, 2014 and 2013 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 2013 Annual Report on Form 10-K for the year ended December 31, 2013. 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 month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the entire year

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Loans (Details 6) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	$ 1,552,738	$ 1,566,791
30-59 days	2,336	4,814
60-89 days	1,755	2,188
90+ days	12,015	11,726
Total Past Due	16,106	18,728
Total Non Accrual	26,786	27,855
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	130,405	126,855
30-59 days	469	1,530
60-89 days	490	191
90+ days	782	1,009
Total Past Due	1,741	2,730
Total Non Accrual	1,173	1,329
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	63,940	65,292
30-59 days	196	531
60-89 days	8	403
90+ days	1,036	386
Total Past Due	1,240	1,320
Total Non Accrual	1,804	1,943
One To Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	194,345	192,147
30-59 days	665	2,061
60-89 days	498	594
90+ days	1,818	1,395
Total Past Due	2,981	4,050
Total Non Accrual	2,977	3,272
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	152,502	149,134
30-59 days	0	0
60-89 days	0	0
90+ days	0	0
Total Past Due	0	0
Total Non Accrual	450	583
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	301,710	311,253
30-59 days	462	334
60-89 days	77	495
90+ days	3,573	3,671
Total Past Due	4,112	4,500
Total Non Accrual	7,748	7,492
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	227,516	225,433
30-59 days	30	1,067
60-89 days	556	918
90+ days	2,087	902
Total Past Due	2,673	2,887
Total Non Accrual	5,087	4,717
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	82,129	81,954
30-59 days	105	21
60-89 days	396	0
90+ days	72	73
Total Past Due	573	94
Total Non Accrual	613	630
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	39,630	45,297
30-59 days	103	0
60-89 days	0	0
90+ days	312	1,287
Total Past Due	415	1,287
Total Non Accrual	1,786	2,412
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	650,985	663,937
30-59 days	700	1,422
60-89 days	1,029	1,413
90+ days	6,044	5,933
Total Past Due	7,773	8,768
Total Non Accrual	15,234	15,251
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	146,532	155,373
30-59 days	169	0
60-89 days	0	0
90+ days	392	419
Total Past Due	561	419
Total Non Accrual	2,471	2,917
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	230,415	230,054
30-59 days	416	37
60-89 days	22	26
90+ days	3,367	3,566
Total Past Due	3,805	3,629
Total Non Accrual	5,259	5,419
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	376,947	385,427
30-59 days	585	37
60-89 days	22	26
90+ days	3,759	3,985
Total Past Due	4,366	4,048
Total Non Accrual	7,730	8,336
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	16,287	16,759
30-59 days	34	131
60-89 days	12
90+ days	0	0
Total Past Due	46	131
Total Non Accrual	0	0
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	106,127	105,657
30-59 days	352	1,163
60-89 days	194	155
90+ days	394	413
Total Past Due	940	1,731
Total Non Accrual	395	413
construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	55,545	53,730
30-59 days	0	0
60-89 days	0	0
90+ days	0	0
Total Past Due	0	0
Total Non Accrual	$ 0	$ 0

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Stock Compensation Plans (Details)	3 Months Ended
	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected average risk-free rate	1.64%
Expected average life	7 years 5 months 8 days
Expected volatility	44.62%
Expected dividend yield	2.17%

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2014

Marketable Securities [Abstract]

Schedule of Available-for-sale and Held to Maturity Securities [Table Text Block]

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
At March 31, 2014
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	5,000	$	-	$	(55)	$	4,945
Mortgage-backed securities – residential		42,183		772		(661)		42,294
REMICs		1,998		-		(13)		1,985
Collateralized mortgage obligations		67,721		766		(712)		67,775
Trust preferred securities and preferred stock		1,610		845		(871)		1,584
Corporate bonds		6,869		121		(29)		6,961
Obligations of state and political subdivisions		80,824		3,395		(442)		83,777
Totals	$	206,205	$	5,899	$	(2,783)	$	209,321

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	30	$	-	$	-	$	30
FNMA certificates		115		3		-		118
GNMA certificates		47		2		-		49
Obligations of state and political subdivisions		186		-		-		186
Totals	$	378	$	5	$	-	$	383

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
At December 31, 2013
Available-for-sale
Obligations of U.S. government corporations and agencies	$	5,000	$	-	$	(79)	$	4,921
Mortgage-backed securities - residential		41,368		765		(841)		41,292
Collateralized mortgage obligations		59,865		739		(763)		59,841
Trust preferred stock and preferred stock		3,264		683		(993)		2,954
Corporate bonds		8,854		129		(41)		8,942
Obligations of state and political subdivisions		78,426		2,704		(910)		80,220
Total Available-for-Sale	$	196,777	$	5,020	$	(3,627)	$	198,170

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity*:
FHLMC certificates	$	31	$	-	$	-	$	31
FNMA certificates		120		4		-		124
GNMA certificates		50		2		-		52
Obligations of states and political subdivisions		186		-		-		186
Total Held-to-Maturity	$	387	$	6	$	-	$	393

* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,003	$	1,017	$	-	$	-
Due after one year through five years		9,657		9,935		186		186
Due after five years through ten years		36,787		38,491		-		-
Due after ten years		46,856		47,824		-		-
MBS/CMO		111,902		112,054		192		197
	$	206,205	$	209,321	$	378	$	383

Unrealized Gain (Loss) on Investments [Table Text Block]

The following tables summarize First Defiance’s securities that were in an unrealized loss position at March 31, 2014 and December 31, 2013:

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At March 31, 2014
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	1,994	$	(6)	$	2,951	$	(49)	$	4,945	$	(55)
Mortgage-backed securities - residential		20,869		(591)		1,834		(70)		22,703		(661)
REMICs		-		-		1,985		(13)		1,985		(13)
Collateralized mortgage obligations		31,762		(571)		1,714		(141)		33,476		(712)
Obligations of state and political subdivisions		11,235		(297)		2,816		(145)		14,051		(442)
Corporate bonds		-		-		2,971		(29)		2,971		(29)
Trust preferred stock and preferred stock		-		-		704		(871)		704		(871)
Total temporarily impaired securities	$	65,860	$	(1,465)	$	14,975	$	(1,318)	$	80,835	$	(2,783)

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At December 31, 2013
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	4,921	$	(79)	$	-	$	-	$	4,921	$	(79)
Mortgage-backed securities - residential		24,846		(841)		-		-		24,846		(841)
Collateralized mortgage obligations		26,530		(763)		-		-		26,530		(763)
Corporate bonds		2,959		(41)		-		-		2,959		(41)
Obligations of state and political subdivisions		19,209		(871)		375		(39)		19,584		(910)
Trust preferred stock and preferred stock		-		-		582		(993)		582		(993)
Total temporarily impaired securities	$	78,465	$	(2,595)	$	957	$	(1,032)	$	79,422	$	(3,627)

Investment [Table Text Block]

The following table provides additional information related to the two CDO investments for which a balance remains as of March 31, 2014 (dollars in thousands):

CDO	Class	Amortized Cost		Fair Value		Unrealized Loss		OTTI  Losses 2014		Lowest Rating	Current Number of Banks and Insurance Companies	Actual Deferrals and Defaults as a % of Current Collateral		Expected Deferrals and Defaults as a % of Remaining Performing Collateral		Excess Sub- ordination  as a % of Current Performing Collateral
TPREF Funding II	B		673		305		368		-	Caa3	16	41.10	%	13.48	%	-	%
Preferred Term Sec XXVII	C-1		902		399		503		-	C	32	26.18	%	18.29	%	6.39	%
Total		$	1,575	$	704	$	871	$	-

Marketable Securities [Table Text Block]

The proceeds from the sales and calls of securities and the associated gains and losses are listed below:

	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Proceeds	$	1,654	$	1,019
Gross realized gains		-		53
Gross realized losses		-		-

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table sets forth the computation of basic and diluted earnings per common share:

	Three months ended March 31,
	2014		2013
	(In Thousands, except per share data)
Numerator for basic and diluted earnings per common share – Net income	$	5,179	$	5,559
Denominator:
Denominator for basic earnings per common share – weighted average common shares		9,681		9,736
Effect of warrants		341		295
Effect of employee stock options		86		74
Denominator for diluted earnings per common share		10,108		10,105
Basic earnings per common share	$	0.53	$	0.57
Diluted earnings per common share	$	0.51	$	0.55

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Loans (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Real Estate:
Real Estate	$ 1,088,060	$ 1,101,428
Other Loans:
Other Loans	503,122	512,068
Total loans	1,591,182	1,613,496
Deduct:
Undisbursed loan funds	(26,487)	(32,290)
Net deferred loan origination fees and costs	(742)	(758)
Allowance for loan loss	(24,783)	(24,950)	(26,459)	(26,711)
Totals	1,539,170	1,555,498
One to Four Family Residential Real Estate [Member]
Real Estate:
Real Estate	196,940	195,752
Multi Family Residential [Member]
Real Estate:
Real Estate	152,318	148,952
Commercial Real Estate [Member]
Real Estate:
Real Estate	656,753	670,666
Construction Loans [Member]
Real Estate:
Real Estate	82,049	86,058
Commercial Loan [Member]
Other Loans:
Other Loans	380,144	388,236
Home Equity and Home Improvement [Member]
Other Loans:
Other Loans	106,632	106,930
Consumer Loan [Member]
Other Loans:
Other Loans	$ 16,346	$ 16,902

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Stock Compensation Plans (Details 1) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding, January 1, 2014	251,020
Options Outstanding, Forfeited or cancelled	4,050
Options Outstanding, Exercised	7,050
Options Outstanding, Granted	500
Options outstanding, March 31, 2014	240,420
Options Outstanding, Vested or expected to vest at March 31, 2014	240,420
Options Outstanding, Exercisable at March 31, 2014	230,000
Weighted Average Exercise Price, Outstanding, January 1, 2014	$ 20.76
Weighted Average Exercise Price, Forfeited or cancelled	$ 23.75
Weighted Average Exercise Price, Exercised	$ 11.24
Weighted Average Exercise Price, Granted	$ 27.59
Weighted Average Exercise Price, Outstanding, March 31, 2014	$ 21.00
Weighted Average Exercise Price, Vested or expected to vest at March 31, 2014	$ 21.11
Weighted Average Exercise Price, Exercisable at March 31, 2014	$ 21.49
Weighted Average Remaining Contractual Term (in years), Outstanding, March 31, 2014	2 years 11 months 1 day
Weighted Average Remaining Contractual Term (in years), Vested or expected to vest at March 31, 2014	2 years 11 months 1 day
Weighted Average Remaining Contractual Term (in years), Exercisable at March 31, 2014	2 years 9 months 22 days
Aggregate Intrinsic Value, Outstanding, March 31, 2014	$ 1,483
Aggregate Intrinsic Value, Vested or expected to vest at March 31, 2014	1,483
Aggregate Intrinsic Value, Exercisable at March 31, 2014	$ 1,307

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Loans (Tables)

3 Months Ended

Mar. 31, 2014

Loans Receivable, Net [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Loans receivable consist of the following: (In Thousands)

	March 31, 2014		December 31, 2013
Real Estate:
Secured by 1-4 family residential	$	196,940	$	195,752
Secured by multi-family residential		152,318		148,952
Secured by commercial real estate		656,753		670,666
Construction		82,049		86,058
		1,088,060		1,101,428
Other Loans:
Commercial		380,144		388,236
Home equity and improvement		106,632		106,930
Consumer Finance		16,346		16,902
		503,122		512,068
Total loans		1,591,182		1,613,496
Deduct:
Undisbursed loan funds		(26,487)		(32,290)
Net deferred loan origination fees and costs		(742)		(758)
Allowance for loan loss		(24,783)		(24,950)
Totals	$	1,539,170	$	1,555,498

Schedule of Valuation Allowance for Impairment of Recognized Servicing Assets [Table Text Block]

The following table discloses allowance for loan loss activity for the quarter ended March 31, 2014 and 2013 by portfolio segment and impairment method: (In Thousands)

Quarter Ended March 31, 2014	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer Finance		Total
Beginning Allowance	$	2,847	$	2,508	$	12,000	$	134	$	5,678	$	1,635	$	148	$	24,950
Charge-Offs		(228)		0		(228)		0		(525)		(184)		(11)		(1,176)
Recoveries		56		3		722		0		76		31		18		906
Provisions		(36)		104		(507)		4		381		165		(8)		103
Ending Allowance	$	2,639	$	2,615	$	11,987	$	138	$	5,610	$	1,647	$	147	$	24,783

Quarter Ended March 31, 2013	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer Finance		Total
Beginning Specific Allocations	$	3,506	$	2,197	$	12,702	$	75	$	6,325	$	1,759	$	147	$	26,711
Charge-Offs		(206)		0		(266)		0		(205)		(272)		(46)		(995)
Recoveries		99		0		101		0		76		23		19		318
Provisions		34		213		830		(8)		(892)		213		35		425
Ending Allowance	$	3,433	$	2,410	$	13,367	$	67	$	5,304	$	1,723	$	155	$	26,459

Schedule of Allowance for Loan Losses and Recorded Investment in Portfolio Segment Based on Impairment [Table Text Block]

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2014: (In Thousands)

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	177	$	-	$	1,131	$	-	$	10	$	23	$	-	$	1,341
Collectively evaluated for impairment		2,462		2,615		10,856		138		5,600		1,624		147		23,442
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,639	$	2,615	$	11,987	$	138	$	5,610	$	1,647	$	147	$	24,783
Loans:
Loans individually evaluated for impairment	$	10,298	$	377	$	31,164	$	262	$	7,531	$	2,391	$	56	$	52,078
Loans collectively evaluated for impairment		187,001		152,125		627,420		55,283		373,756		104,676		16,277		1,516,539
Loans acquired with deteriorated credit quality		27		-		174		-		26		-		-		227
Total ending loans balance	$	197,326	$	152,502	$	658,758	$	55,545	$	381,313	$	107,067	$	16,333	$	1,568,844

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2013: (In Thousands)

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	220	$	-	$	1,121	$	-	$	6	$	45	$	-	$	1,392
Collectively evaluated for impairment		2,627		2,508		10,879		134		5,672		1,590		148		23,558
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,847	$	2,508	$	12,000	$	134	$	5,678	$	1,635	$	148	$	24,950
Loans:
Loans individually evaluated for impairment	$	10,245	$	840	$	34,874	$	263	$	8,737	$	2,429	$	53	$	57,441
Loans collectively evaluated for impairment		185,923		148,294		637,657		53,467		380,711		104,958		16,838		1,527,848
Loans acquired with deteriorated credit quality		29		-		174		-		27		-		-		230
Total ending loans balance	$	196,197	$	149,134	$	672,705	$	53,730	$	389,475	$	107,387	$	16,891	$	1,585,519

Loans Receivable, Impaired, Interest Income, Cash Basis Method [Table Text Block]

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans: (In Thousands)

	Three Months Ended March 31, 2014
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,329	$	85	$	83
Residential Non Owner Occupied		4,084		38		38
Total Residential Real Estate		10,413		123		121
Multi-Family		388		1		1
CRE Owner Occupied		9,837		36		35
CRE Non Owner Occupied		19,355		204		204
Agriculture Land		687		3		2
Other CRE		1,862		5		5
Total Commercial Real Estate		31,741		248		246
Construction		261		3		5
Commercial Working Capital		2,924		3		3
Commercial Other		4,959		2		2
Total Commercial		7,883		5		5
Home Equity and Home Improvement		2,439		25		25
Consumer		57		1		1
Total Impaired Loans	$	53,182	$	406	$	404

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans: (In Thousands)

	Three Months Ended March 31, 2013
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,947	$	88	$	86
Residential Non Owner Occupied		4,669		35		35
Total Residential Real Estate		11,616		123		121
Multi-Family		1,444		7		7
CRE Owner Occupied		14,701		62		58
CRE Non Owner Occupied		24,318		203		193
Agriculture Land		926		9		7
Other CRE		5,369		1		1
Total Commercial Real Estate		45,314		275		259
Construction		22		-		-
Commercial Working Capital		1,487		4		5
Commercial Other		6,981		23		22
Total Commercial		8,468		27		27
Home Equity and Home Improvement		2,772		34		32
Consumer		104		2		2
Total Impaired Loans	$	69,740	$	468	$	448

Impaired Financing Receivables [Table Text Block]

The following table presents loans individually evaluated for impairment by class of loans: (In Thousands)

	March 31, 2014						December 31, 2013
	Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated
With no allowance recorded:
Residential Owner Occupied	$	4,853	$	4,771	$	-	$	4,744	$	4,729	$	-
Residential Non Owner Occupied		4,061		3,967		-		4,844		4,329		-
Total 1-4 Family Residential Real Estate		8,914		8,738		-		9,588		9,058		-
Multi-Family Residential Real Estate		527		377		-		989		840		-
CRE Owner Occupied		9,202		6,799		-		11,105		8,376		-
CRE Non Owner Occupied		7,600		6,506		-		9,399		7,740		-
Agriculture Land		497		477		-		629		488		-
Other CRE		2,305		1,771		-		3,274		2,452		-
Total Commercial Real Estate		19,604		15,553		-		24,407		19,056		-
Construction		261		262		-		300		263		-
Commercial Working Capital		3,134		2,610		-		3,147		3,146		-
Commercial Other		5,478		4,857		-		6,063		5,415		-
Total Commercial		8,612		7,467		-		9,210		8,561		-
Consumer		56		56		-		53		53		-
Home Equity and Home Improvement		2,228		2,235		-		1,985		1,992		-
Total loans with no allowance recorded	$	40,202	$	34,688	$	-	$	46,532	$	39,823	$	-
With an allowance recorded:
Residential Owner Occupied	$	1,477	$	1,477	$	175	$	1,100	$	1,103	$	218
Residential Non Owner Occupied		83		83		2		84		84		2
Total 1-4 Family Residential Real Estate		1,560		1,560		177		1,184		1,187		220
Multi-Family Residential Real Estate		-		-		-		-		-		-
CRE Owner Occupied		3,153		2,707		161		3,212		2,765		166
CRE Non Owner Occupied		12,592		12,639		961		12,756		12,803		946
Agriculture Land		211		213		7		195		197		7
Other CRE		80		52		2		82		53		2
Total Commercial Real Estate		16,036		15,611		1,131		16,245		15,818		1,121
Construction		-		-		-		-		-		-
Commercial Working Capital		-		-		-		-		-		-
Commercial Other		63		64		10		176		176		6
Total Commercial		63		64		10		176		176		6
Consumer		-		-		-		-		-		-
Home Equity and Home Improvement		155		156		23		436		437		45
Total loans with an allowance recorded	$	17,814	$	17,391	$	1,341	$	18,041	$	17,618	$	1,392

* Presented gross of charge offs

Schedule of Non-Performing Loans and Real Estate Owned [Table Text Block]

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

	March 31, 2014		December 31, 2013
	(In Thousands)
Non-accrual loans	$	26,774	$	27,847
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		26,774		27,847
Real estate and other assets held for sale		6,028		5,859
Total non-performing assets	$	32,802	$	33,706
Troubled debt restructuring, still accruing	$	26,654	$	27,630

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

The following table presents the aging of the recorded investment in past due and non accrual loans as of March 31, 2014 by class of loans: (In Thousands)

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Residential Owner Occupied	$	130,405	$	469	$	490	$	782	$	1,741	$	1,173
Residential Non Owner Occupied		63,940		196		8		1,036		1,240		1,804
Total 1-4 Family Residential Real Estate		194,345		665		498		1,818		2,981		2,977
Multi-Family Residential Real Estate		152,502		-		-		-		-		450
CRE Owner Occupied		301,710		462		77		3,573		4,112		7,748
CRE Non Owner Occupied		227,516		30		556		2,087		2,673		5,087
Agriculture Land		82,129		105		396		72		573		613
Other Commercial Real Estate		39,630		103		-		312		415		1,786
Total Commercial Real Estate		650,985		700		1,029		6,044		7,773		15,234
Construction		55,545		-		-		-		-		-
Commercial Working Capital		146,532		169		-		392		561		2,471
Commercial Other		230,415		416		22		3,367		3,805		5,259
Total Commercial		376,947		585		22		3,759		4,366		7,730
Consumer Finance		16,287		34		12		-		46		-
Home Equity/Home Improvement		106,127		352		194		394		940		395
Total Loans	$	1,552,738	$	2,336	$	1,755	$	12,015	$	16,106	$	26,786

The following table presents the aging of the recorded investment in past due and non accrual loans as of December 31, 2013 by class of loans: (In Thousands)

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Residential Owner Occupied	$	126,855	$	1,530	$	191	$	1,009	$	2,730	$	1,329
Residential Non Owner Occupied		65,292		531		403		386		1,320		1,943
Total 1-4 Family Residential Real Estate		192,147		2,061		594		1,395		4,050		3,272
Multi-Family Residential Real Estate		149,134		-		-		-		-		583
CRE Owner Occupied		311,253		334		495		3,671		4,500		7,492
CRE Non Owner Occupied		225,433		1,067		918		902		2,887		4,717
Agriculture Land		81,954		21		-		73		94		630
Other Commercial Real Estate		45,297		-		-		1,287		1,287		2,412
Total Commercial Real Estate		663,937		1,422		1,413		5,933		8,768		15,251
Construction		53,730		-		-		-		-		-
Commercial Working Capital		155,373		-		-		419		419		2,917
Commercial Other		230,054		37		26		3,566		3,629		5,419
Total Commercial		385,427		37		26		3,985		4,048		8,336
Consumer Finance		16,759		131				-		131		-
Home Equity/Home Improvement		105,657		1,163		155		413		1,731		413
Total Loans	$	1,566,791	$	4,814	$	2,188	$	11,726	$	18,728	$	27,855

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ending March 31, 2014 and March 31, 2013:

	Loans Modified as a TDR for the Three Months Ended March 31, 2014 ($ in thousands)			Loans Modified as a TDR for the Three Months Ended March 31, 2013 ($ in thousands)
Troubled Debt Restructurings	Number of Loans	Recorded Investment (as of period end)		Number of Loans	Recorded Investment (as of period end)
1-4 Family Owner Occupied	9	$	763	4	$	367
1-4 Family Non Owner Occupied	0		-	1		198
CRE Owner Occupied	0		-	1		29
CRE Non Owner Occupied	1		361	0		-
Agriculture Land	0		-	1		219
Other CRE	0		-	0		0
Commercial Working Capital or Other	2		321	1		14
Home Equity and Improvement	3		60	8		492
Consumer Finance	3		11	2		4
Total	18	$	1,516	18	$	1,323

Troubled Debt Restructurings on Payments [Table Text Block]

The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the quarters ending March 31, 2014 and March 31, 2013:

	Three Months Ended March 31, 2014 ($ in thousands)			Three Months Ended March 31, 2013 ($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans	Recorded Investment (as of period end)		Number of Loans	Recorded Investment (as of period end)
1-4 Family Owner Occupied	0	$	-	4	$	312
1-4 Family Non Owner Occupied	0		-	1		198
CRE Owner Occupied	0		-	2		858
CRE Non Owner Occupied	0		-	0		-
Agriculture Land	0		-	0		-
Other CRE	0		-	0		-
Commercial Working Capital or Other	0		-	2		744
Home Equity and Improvement	0		-	4		53
Consumer Finance	0		-	0		-
Total	0	$	-	13	$	2,165

Financing Receivable Credit Quality Indicators [Table Text Block]

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of March 31, 2014, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (In Thousands)

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
1-4 Family Owner Occupied	$	3,381	$	17	$	2,068	$	782	$	125,899	$	132,147
1-4 Family Non Owner Occupied		50,472		2,975		5,673		-		6,059		65,179
Total 1-4 Family Real Estate		53,853		2,992		7,741		782		131,958		197,326
Multi-Family Residential Real Estate		148,487		1,761		1,302		-		952		152,502
CRE Owner Occupied		282,897		11,643		9,696		-		1,585		305,821
CRE Non Owner Occupied		200,123		13,014		17,014		-		39		230,190
Agriculture Land		81,229		570		903		-		-		82,702
Other CRE		35,536		918		2,908		-		683		40,045
Total Commercial Real Estate		599,785		26,145		30,521		-		2,307		658,758
Construction		46,059		-		262		-		9,224		55,545
Commercial Working Capital		139,428		4,406		3,260		-		-		147,094
Commercial Other		217,391		10,227		6,601		-		-		234,219
Total Commercial		356,819		14,633		9,861		-		-		381,313
Home Equity and Home Improvement		-		-		546		394		106,127		107,067
Consumer Finance		-		-		46		-		16,287		16,333
Total Loans	$	1,205,003	$	45,531	$	50,279	$	1,176	$	266,855	$	1,568,844

As of December 31, 2013, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (In Thousands)

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
1-4 Family Owner Occupied	$	4,287	$	18	$	3,515	$	-	$	121,765	$	129,585
1-4 Family Non Owner Occupied		51,660		2,894		5,699		-		6,359		66,612
Total 1-4 Family Real Estate		55,947		2,912		9,214		-		128,124		196,197
Multi-Family Residential Real Estate		145,407		875		1,888		-		964		149,134
CRE Owner Occupied		291,770		10,584		11,665		-		1,734		315,753
CRE Non Owner Occupied		200,790		10,254		17,185		-		91		228,320
Agriculture Land		80,418		578		1,051		-		-		82,047
Other CRE		40,676		2,074		3,104		-		731		46,585
Total Commercial Real Estate		613,654		23,490		33,005		-		2,556		672,705
Construction		43,465		-		263		-		10,002		53,730
Commercial Working Capital		148,703		3,429		3,660		-		-		155,792
Commercial Other		219,790		6,994		6,899		-		-		233,683
Total Commercial		368,493		10,423		10,559		-		-		389,475
Home Equity and Home Improvement		-		-		755		45		106,587		107,387
Consumer Finance		-		-		31		-		16,860		16,891
Total Loans	$	1,226,966	$	37,700	$	55,715	$	45	$	265,093	$	1,585,519

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Mortgage Banking (Tables)

3 Months Ended

Mar. 31, 2014

Mortgage Banking [Abstract]

Mortgage Loans [Table Text Block]

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Three Months Ended
	March 31,
	2014		2013
	(In Thousands)
Gain from sale of mortgage loans	$	641	$	2,176
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		905		870
Amortization of mortgage servicing rights		(292)		(689)
Mortgage servicing rights valuation adjustments		(7)		473
		606		654
Net revenue from sale and servicing of mortgage loans	$	1,247	$	2,830

Capitalized Mortgage and Valuation Allowance [Table Text Block]

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three months ended March 31, 2014 and 2013:

	March 31,		March 31,
	2014		2013
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,133	$	10,121
Loans sold, servicing retained		207		762
Amortization		(292)		(689)
Carrying value before valuation allowance at end of period		10,048		10,194
Valuation allowance:
Balance at beginning of period		(1,027)		(2,288)
Impairment (expense) recovery		(7)		473
Balance at end of period		(1,034)		(1,815)
Net carrying value of MSRs at end of period	$	9,014	$	8,379
Fair value of MSRs at end of period	$	9,628	$	8,436

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Consolidated Condensed Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Operating Activities
Net income	$ 5,179	$ 5,559
Items not requiring (providing) cash
Provision for loan losses	103	425
Depreciation	725	809
Amortization of mortgage servicing rights, net of impairment recoveries	299	216
Amortization of core deposit and other intangible assets	289	336
Net amortization of premiums and discounts on loans and deposits	160	199
Amortization of premiums and discounts on securities	93	129
Change in deferred taxes	(129)	27
Proceeds from the sale of loans held for sale	27,698	112,112
Origination of loans held for sale	(28,093)	(99,395)
Gain from sale of loans	(644)	(2,191)
Loss from sale of property and equipment	0	1
Gain from sale or call of securities	0	(53)
Loss on sale or write-down of real estate and other assets held for sale	(38)	17
Stock option expense	20	19
Restricted stock expense (credit)	(177)	324
Income from bank owned life insurance	(219)	(229)
Changes in:
Accrued interest receivable	(344)	(431)
Other assets	(2,069)	(383)
Other liabilities	2,489	(1,854)
Net cash provided by operating activities	5,342	15,637
Investing Activities
Proceeds from maturities of held-to-maturity securities	8	16
Proceeds from maturities, calls and pay-downs of available-for-sale securities	5,496	13,805
Proceeds from sale of real estate and other assets held for sale	496	785
Proceeds from the sale of available-for-sale securities	1,654	1,019
Proceeds from sale of non-mortgage loans	8,679	3,629
Purchases of available-for-sale securities	(16,672)	(17,647)
Purchase of bank owned life insurance	(4,000)	0
Purchase of portfolio mortgage loans	(5,118)	0
Proceeds from Federal Home Loan stock redemption	5,548	1,301
Purchases of premises and equipment, net	(507)	(365)
Net decrease in loans receivable	13,058	12,447
Net cash provided by investing activities	8,642	14,990
Financing Activities
Net (decrease) increase in deposits and advance payments by borrowers	24,515	(11,229)
Repayment of Federal Home Loan Bank advances	(242)	(12)
Increase (decrease) in securities sold under repurchase agreements	(2,980)	1,045
Proceeds from exercise of stock options	76	52
Net cash paid for repurchase of common stock	(2,039)	0
Cash dividends paid on common stock	(1,449)	(973)
Net cash provided by (used in) financing activities	17,881	(11,117)
Increase in cash and cash equivalents	31,865	19,510
Cash and cash equivalents at beginning of period	179,318	136,832
Cash and cash equivalents at end of period	211,183	156,342
Supplemental cash flow information:
Interest paid	1,662	1,923
Income taxes paid	0	3,100
Transfers from loans to real estate and other assets held for sale	$ 627	$ 1,310

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Deposits (Tables)

3 Months Ended

Mar. 31, 2014

Deposits [Abstract]

Deposits [Table Text Block]

	March 31,		December 31,
	2014		2013
	(In Thousands)
Non-interest-bearing checking accounts	$	338,412	$	348,943
Interest-bearing checking and money market accounts		740,783		715,939
Savings deposits		199,361		185,121
Retail certificates of deposit less than $100,000		309,758		313,335
Retail certificates of deposit greater than $100,000		172,303		172,454
	$	1,760,617	$	1,735,792

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Fair Value (Details 3) (USD $) In Thousands, unless otherwise specified					3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2014 Range of Input 40% [Member]	Dec. 31, 2013 Range of Input 40% [Member]	Mar. 31, 2014 Range of Input 0-30% [Member]	Dec. 31, 2013 Range of Input 0-30% [Member]	Mar. 31, 2014 Range Of Input 10-15% [Member]	Dec. 31, 2013 Range Of Input 10-15% [Member]	Mar. 31, 2014 Range of Input 0-10% [Member]	Dec. 31, 2013 Range of Input 0-10% [Member]	Dec. 31, 2013 Range of Input 0-20% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Trust preferred stock, Fair Value	$ 704	$ 582	$ 1,651	$ 1,474
Impaired Loans- Applies to all loan classes, Fair Value	10,117	10,718
Real estate held for sale - Applies to all classes, Fair Value		$ 1,390
Valuation Technique, Fair Value					Discounted cash flow	Discounted cash flow					Appraisals which utilize sales comparison, net income and cost approach	Appraisals which utilize sales comparison, net income and cost approach	Appraisals which utilize sales comparison, net income and cost approach
Unobservable Inputs, Fair Value					Constant prepayment rate	Constant prepayment rate	Expected asset default	Expected asset default	Expected recoveries	Expected recoveries	Discounts for collection issues and changes in market conditions	Discounts for collection issues and changes in market conditions	Discounts for changes in market conditions
Fair Value, Range Of Input					40.00%	40.00%
Fair Value, Range of Input, Minimum							0.00%	0.00%	10.00%	10.00%	0.00%	0.00%	0.00%
Fair Value, Range of Input, Maximum					40.00%	40.00%	30.00%	30.00%	15.00%	15.00%	10.00%	10.00%	20.00%
Fair Value Measurement Weighted Average Range					40.00%	40.00%	15.00%	15.00%	10.00%	10.00%	10.00%	10.00%	20.00%

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Investment Securities (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Investment Securities [Line Items]
Amortized Cost	$ 1,575
Fair Value	704
Unrealized Loss	871
OTTI Losses 2013	0
Class B [Member] | TPREF Funding II [Member] | Moodys, Caa3 Rating [Member]
Investment Securities [Line Items]
Amortized Cost	673
Fair Value	305
Unrealized Loss	368
OTTI Losses 2013	0
Current Number of Banks and Insurance Companies	16
Actual Deferrals and Defaults as a percentage of Current Collateral	41.10%
Expected Deferrals and Defaults as a % of Remaining Performing Collateral	13.48%
Excess Sub-ordination as a % of Current Performing Collateral	0.00%
Class C 01 [Member] | Preferred Term Sec XXVII [Member] | Moodys, C Rating [Member]
Investment Securities [Line Items]
Amortized Cost	902
Fair Value	399
Unrealized Loss	503
OTTI Losses 2013	$ 0
Current Number of Banks and Insurance Companies	32
Actual Deferrals and Defaults as a percentage of Current Collateral	26.18%
Expected Deferrals and Defaults as a % of Remaining Performing Collateral	18.29%
Excess Sub-ordination as a % of Current Performing Collateral	6.39%

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Borrowings (Details Textual) (USD $) In Millions, unless otherwise specified		3 Months Ended	12 Months Ended			3 Months Ended			3 Months Ended
	Mar. 31, 2014 Putable Advances [Member]	Mar. 31, 2014 Strike Rate Advances [Member]	Dec. 31, 2005 Trust Affiliate I [Member]	Mar. 31, 2014 Trust Affiliate I [Member]	Dec. 31, 2013 Trust Affiliate I [Member]	Mar. 31, 2007 Trust Affiliate II [Member]	Mar. 31, 2014 Trust Affiliate II [Member]	Dec. 31, 2013 Trust Affiliate II [Member]	Mar. 31, 2014 Trust Affiliate II [Member] Strike Rate Advances [Member]
Subordinated Borrowing [Line Items]
Federal Home Loan Bank Advances Balance Amount Yet To Be Called Series1	$ 12.0
Federal Home Loan Bank Advances Interest Rate On Balance Amount Yet To Be Called Series1	2.72%
Issuance Of Trust Preferred Securities			20			15
Issuance Of Subordinated Debentures			$ 20.6			$ 15.5
Federal Home Loan Bank, Advances, Maturities Summary, Average Interest Rate of Amounts Due within One Year of Balance Sheet Date						6.441%
Preferred Securities Variable Interest Rate			LIBOR rate plus 1.38%			LIBOR plus 1.5%
Coupon Rate On Preferred Securities, Period End				1.61%	1.63%		1.73%	1.75%
Federal Home Loan Bank Advances Branch Of Fhlb Bank Last Due Date									March 12, 2018
Federal Home Loan Bank Advances Branch Of Fhlb Bank Earliest Due Date		January 14, 2015

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Consolidated Condensed Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Cash and cash equivalents:
Cash and amounts due from depository institutions	$ 42,183	$ 36,318
Federal funds sold	169,000	143,000
Cash and cash equivalents at beginning of year	211,183	179,318
Securities:
Available-for-sale, carried at fair value	209,321	198,170
Held-to-maturity, carried at amortized cost (fair value $383 and $393 at March 31, 2014 and December 31, 2013, respectively)	378	387
Marketable Securities, Total	209,699	198,557
Loans held for sale	8,771	9,120
Loans receivable, net of allowance of $24,783 at March 31, 2014 and $24,950 at December 31, 2013, respectively	1,539,170	1,555,498
Accrued interest receivable	6,122	5,778
Federal Home Loan Bank stock	13,802	19,350
Bank owned life insurance	46,934	42,715
Premises and equipment	38,379	38,597
Real estate and other assets held for sale	6,028	5,859
Goodwill	61,525	61,525
Core deposit and other intangibles	3,208	3,497
Mortgage servicing rights	9,014	9,106
Deferred taxes	92	565
Other assets	9,732	7,663
Total assets	2,163,659	2,137,148
Liabilities:
Deposits	1,760,617	1,735,792
Advances from the Federal Home Loan Bank	22,278	22,520
Subordinated debentures	36,083	36,083
Securities sold under repurchase agreements	48,939	51,919
Advance payments by borrowers	1,209	1,519
Other liabilities	19,656	17,168
Total liabilities	1,888,782	1,865,001
Stockholders' equity:
Preferred stock, $.01 par value per share: 4,963,000 shares authorized; no shares issued	0	0
Common stock, $.01 par value per share: 25,000,000 shares authorized; 12,735,313 and 12,735,313 shares issued and 9,652,966 and 9,719,521 shares outstanding, respectively	127	127
Common stock warrant	878	878
Additional paid-in capital	136,142	136,403
Accumulated other comprehensive income, net of tax of $897 and $294, respectively	1,665	545
Retained earnings	186,001	182,290
Treasury stock, at cost, 3,082,347 and 3,015,792 shares respectively	(49,936)	(48,096)
Total stockholders' equity	274,877	272,147
Total liabilities and stockholders' equity	$ 2,163,659	$ 2,137,148

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Stock Compensation Plans (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Unvested at March 31, 2014	99,132
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Unvested at January 1, 2014	106,061
Shares, Granted	30,538
Shares, Vested	0
Shares, Forfeited	(37,467)
Shares, Unvested at March 31, 2014	99,132
Weighted-Average Grant Date Fair Value, Unvested at January 1, 2014	$ 18.66
Weighted-Average Grant Date Fair Value, Granted	$ 25.77
Weighted-Average Grant Date Fair Value, Vested	$ 0
Weighted-Average Grant Date Fair Value, Forfeited	$ 18.71
Weighted -Average Grant Date Fair Value, Unvested at March 31, 2014	$ 21.32
Stock Grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Unvested at January 1, 2014	0
Shares, Granted	5,767
Shares, Vested	0
Shares, Forfeited	0
Shares, Unvested at March 31, 2014	5,767
Weighted-Average Grant Date Fair Value, Unvested at January 1, 2014	$ 0
Weighted-Average Grant Date Fair Value, Granted	$ 25.97
Weighted-Average Grant Date Fair Value, Vested	$ 0
Weighted-Average Grant Date Fair Value, Forfeited	$ 0
Weighted -Average Grant Date Fair Value, Unvested at March 31, 2014	$ 25.97

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Consolidated Statement of Changes in Stockholders’ Equity (USD $) In Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Common Stock Warrant [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Treasury Stock [Member]
Balance at Dec. 31, 2012	$ 258,128	$ 0	$ 127	$ 878	$ 136,046	$ 4,274	$ 164,103	$ (47,300)
Net income	5,559						5,559
Other comprehensive income (loss)	(466)					(466)
Stock option expense	19				19
Shares issued under stock option plan	52				(9)		(81)	142
Restricted share activity under stock incentive plans	324				(131)		(45)	500
Common stock dividends declared	(973)						(973)
Balance at Mar. 31, 2013	262,643	0	127	878	135,925	3,808	168,563	(46,658)
Balance at Dec. 31, 2013	272,147	0	127	878	136,403	545	182,290	(48,096)
Net income	5,179						5,179
Other comprehensive income (loss)	1,120					1,120
Stock option expense	20				20
Shares issued under stock option plan	76				(11)		(19)	106
Restricted share activity under stock incentive plans	(177)				(270)			93
shares repurchased	(2,039)							(2,039)
Common stock dividends declared	(1,449)						(1,449)
Balance at Mar. 31, 2014	$ 274,877	$ 0	$ 127	$ 878	$ 136,142	$ 1,665	$ 186,001	$ (49,936)

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Loans (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	$ 53,182	$ 69,740
Interest Income Recognized	406	468
Cash Basis Income Recognized	404	448
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	6,329	6,947
Interest Income Recognized	85	88
Cash Basis Income Recognized	83	86
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	4,084	4,669
Interest Income Recognized	38	35
Cash Basis Income Recognized	38	35
One To Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	10,413	11,616
Interest Income Recognized	123	123
Cash Basis Income Recognized	121	121
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	388	1,444
Interest Income Recognized	1	7
Cash Basis Income Recognized	1	7
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	9,837	14,701
Interest Income Recognized	36	62
Cash Basis Income Recognized	35	58
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	19,355	24,318
Interest Income Recognized	204	203
Cash Basis Income Recognized	204	193
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	687	926
Interest Income Recognized	3	9
Cash Basis Income Recognized	2	7
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	1,862	5,369
Interest Income Recognized	5	1
Cash Basis Income Recognized	5	1
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	31,741	45,314
Interest Income Recognized	248	275
Cash Basis Income Recognized	246	259
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,924	1,487
Interest Income Recognized	3	4
Cash Basis Income Recognized	3	5
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	4,959	6,981
Interest Income Recognized	2	23
Cash Basis Income Recognized	2	22
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	7,883	8,468
Interest Income Recognized	5	27
Cash Basis Income Recognized	5	27
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	261	22
Interest Income Recognized	3	0
Cash Basis Income Recognized	5	0
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	57	104
Interest Income Recognized	1	2
Cash Basis Income Recognized	1	2
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,439	2,772
Interest Income Recognized	25	34
Cash Basis Income Recognized	$ 25	$ 32

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position Carrying Value [Table Text Block]

The fair value of these mortgage banking derivatives are reflected by a derivative asset. The table below provides data about the carrying values of these derivative instruments:

March 31, 2014

December 31, 2013

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

$

345

$

-

$

345

$

295

$

-

$

295

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments:

	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	50	$	(161)

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Loans (Details 9) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 1,568,844	$ 1,585,519
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,205,003	1,226,966
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	45,531	37,700
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	50,279	55,715
Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,176	45
Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	266,855	265,093
One To Four Family Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	132,147	129,585
One To Four Family Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,381	4,287
One To Four Family Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	17	18
One To Four Family Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,068	3,515
One To Four Family Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	782	0
One To Four Family Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	125,899	121,765
One To Four Family Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	65,179	66,612
One To Four Family Non Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	50,472	51,660
One To Four Family Non Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,975	2,894
One To Four Family Non Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	5,673	5,699
One To Four Family Non Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
One To Four Family Non Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	6,059	6,359
One To Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	197,326	196,197
One To Four Family Residential Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	53,853	55,947
One To Four Family Residential Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,992	2,912
One To Four Family Residential Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	7,741	9,214
One To Four Family Residential Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	782	0
One To Four Family Residential Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	131,958	128,124
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	152,502	149,134
Multi Family Residential Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	148,487	145,407
Multi Family Residential Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,761	875
Multi Family Residential Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,302	1,888
Multi Family Residential Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Multi Family Residential Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	952	964
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	305,821	315,753
Commercial Real Estate Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	282,897	291,770
Commercial Real Estate Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	11,643	10,584
Commercial Real Estate Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	9,696	11,665
Commercial Real Estate Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,585	1,734
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	230,190	228,320
Commercial Real Estate Non Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	200,123	200,790
Commercial Real Estate Non Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	13,014	10,254
Commercial Real Estate Non Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	17,014	17,185
Commercial Real Estate Non Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Non Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	39	91
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	82,702	82,047
Agriculture Land [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	81,229	80,418
Agriculture Land [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	570	578
Agriculture Land [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	903	1,051
Agriculture Land [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Agriculture Land [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	40,045	46,585
Commercial Real Estate Other Receivable [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	35,536	40,676
Commercial Real Estate Other Receivable [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	918	2,074
Commercial Real Estate Other Receivable [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,908	3,104
Commercial Real Estate Other Receivable [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Other Receivable [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	683	731
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	658,758	672,705
Commercial Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	599,785	613,654
Commercial Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	26,145	23,490
Commercial Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	30,521	33,005
Commercial Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,307	2,556
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	147,094	155,792
Commercial Working Capital [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	139,428	148,703
Commercial Working Capital [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,406	3,429
Commercial Working Capital [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,260	3,660
Commercial Working Capital [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Working Capital [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	234,219	233,683
Commercial Loans Other [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	217,391	219,790
Commercial Loans Other [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	10,227	6,994
Commercial Loans Other [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	6,601	6,899
Commercial Loans Other [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loans Other [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	381,313	389,475
Commercial Loan [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	356,819	368,493
Commercial Loan [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	14,633	10,423
Commercial Loan [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	9,861	10,559
Commercial Loan [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loan [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	55,545	53,730
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	107,067	107,387
Home Equity and Home Improvement [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	546	755
Home Equity and Home Improvement [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	394	45
Home Equity and Home Improvement [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	106,127	106,587
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	16,333	16,891
Consumer Loan [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Loan [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Loan [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	46	31
Consumer Loan [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Loan [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	16,287	16,860
construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	55,545	53,730
construction [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	46,059	43,465
construction [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
construction [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	262	263
construction [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
construction [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 9,224	$ 10,002

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

14. Derivative Financial Instruments

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. First Federal had approximately $10.7 million and $7.5 million of interest rate lock commitments at March 31, 2014 and December 31, 2013, respectively. There were $14.8 million and $12.1 million of forward commitments for the future delivery of residential mortgage loans at March 31, 2014 and December 31, 2013, respectively.

The fair value of these mortgage banking derivatives are reflected by a derivative asset. The table below provides data about the carrying values of these derivative instruments:

March 31, 2014

December 31, 2013

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

$

345

$

-

$

345

$

295

$

-

$

295

The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments:

	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	50	$	(161)

The above amounts are included in mortgage banking income with gain on sale of mortgage loans.

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Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2014

Other Comprehensive Income (Loss), Net Of Tax [Abstract]

Other Comprehensive Income Loss Reclassification Adjustments Related To Securities Available For Sale [Table Text Block]

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale or call of securities in the accompanying consolidated condensed statements of income.

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
	(In Thousands)
Three months ended March 31, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period	$	1,723	$	603	$	1,120
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive loss	$	1,723	$	603	$	1,120
Three months ended March 31, 2013:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period	$	(664)	$	(235)	$	(429)
Reclassification adjustment for net gains included in net income		(53)		(16)		(37)
Total other comprehensive loss	$	(717)	$	(251)	$	(466)

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

					Accumulated
	Securities		Post-		Other
	Available		retirement		Comprehensive
	For Sale		Benefit		Income
	(In Thousands)
Balance January 1, 2014	$	906	$	(361)	$	545
Other comprehensive loss before reclassifications		1,120		-		1,120
Amounts reclassified from accumulated other comprehensive loss		-		-		-
Net other comprehensive loss during period		1,120		-		1,120
Balance March 31, 2014	$	2,026	$	(361)	$	1,665
Balance January 1, 2013	$	4,851	$	(577)	$	4,274
Other comprehensive loss before reclassifications		(429)		-		(429)
Amounts reclassified from accumulated other comprehensive loss		(37)		-		(37)
Net other comprehensive loss during period		(466)		-		(466)
Balance March 31, 2013	$	4,385	$	(577)	$	3,808

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Subsequent Event

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 16 – Subsequent Event

On April 21, 2014, the First Federal and First Community Bank (“FCB”) jointly announced the termination of the previously announced merger agreement dated February 18, 2014. Both companies mutually agreed to terminate the agreement after it became evident that completion of the merger would take significantly longer than originally expected. The Company incurred $786,000 in costs related to the termination in the first quarter of 2014.

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Mortgage Banking (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Mortgage servicing assets:
Balance at beginning of period	$ 10,133	$ 10,121
Loans sold, servicing retained	207	762
Amortization	(292)	(689)
Carrying value before valuation allowance at end of period	10,048	10,194
Valuation allowance:
Balance at beginning of period	(1,027)	(2,288)
Impairment (expense) recovery	(299)	(216)
Balance at end of period	(1,034)	(1,815)
Net carrying value of MSRs at end of period	9,014	8,379
Fair value of MSRs at end of period	$ 9,628	$ 8,436

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Consolidated Statement of Changes in Stockholders’ Equity (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Stock options exercised, income tax benefit (in shares)	7,050	4,870
Shares issued direct purchases (in shares)	5,767	31,796
shares purchased	78,972
Stock Based Compensation Income Tax Benefit	$ 17	$ 0

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Consolidated Condensed Statements of Financial Condition (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Held-to-maturity, fair value (in dollars)	$ 383	[1]	$ 393	[1]
Loans receivable, allowance (in dollars)	24,783		24,950
Preferred stock, par value (in dollars per share)	$ 0.01		$ 0.01
Preferred stock, shares authorized	4,963,000		4,963,000
Preferred stock, shares issued	0		0
Common stock, par value (in dollars per share)	$ 0.01		$ 0.01
Common stock, shares authorized	25,000,000		25,000,000
Common stock, shares issued	12,735,313		12,735,313
Common stock, shares outstanding	9,652,966		9,719,521
Accumulated other comprehensive income, tax effect (in dollars)	$ 897		$ 294
Treasury stock, shares	3,082,347		3,015,792

[1] FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

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Mortgage Banking

3 Months Ended

Mar. 31, 2014

Mortgage Banking [Abstract]

Mortgage Banking [Text Block]

9. Mortgage Banking

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Three Months Ended
	March 31,
	2014		2013
	(In Thousands)
Gain from sale of mortgage loans	$	641	$	2,176
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		905		870
Amortization of mortgage servicing rights		(292)		(689)
Mortgage servicing rights valuation adjustments		(7)		473
		606		654
Net revenue from sale and servicing of mortgage loans	$	1,247	$	2,830

The unpaid principal balance of residential mortgage loans serviced for third parties was $1.4 billion at March 31, 2014 and December 31, 2013.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three months ended March 31, 2014 and 2013:

	March 31,		March 31,
	2014		2013
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,133	$	10,121
Loans sold, servicing retained		207		762
Amortization		(292)		(689)
Carrying value before valuation allowance at end of period		10,048		10,194
Valuation allowance:
Balance at beginning of period		(1,027)		(2,288)
Impairment (expense) recovery		(7)		473
Balance at end of period		(1,034)		(1,815)
Net carrying value of MSRs at end of period	$	9,014	$	8,379
Fair value of MSRs at end of period	$	9,628	$	8,436

Amortization of mortgage servicing rights is computed based on payments and payoffs of the related mortgage loans serviced. Estimates of future amortization expense are not easily estimable.

The Company has established an accrual for estimated secondary market buy-back losses in the first quarter of 2014. An accrual for secondary market buy-backs was established in the first quarter of 2014 for $92,000 which was mostly offset by reversing $67,000 of accrued expenses related to the Freddie Mac post-foreclosure review that began in the third quarter of 2013 and was reversed in 2014 with no losses resulting.

Included in the first quarter of 2013 is an accrual for estimated secondary market buy-back losses of $581,000. These losses were accrued and expensed as of March 31, 2013 based on an estimated exposure to repurchase requests resulting from notifications received from Fannie Mae’s post-foreclosure review process during the first quarter of 2013.

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Document And Entity Information	3 Months Ended
	Mar. 31, 2014	Apr. 30, 2014
Document Information [Line Items]
Entity Registrant Name	FIRST DEFIANCE FINANCIAL CORP
Entity Central Index Key	0000946647
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	FDEF
Entity Common Stock, Shares Outstanding		9,665,100
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014

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Deposits

3 Months Ended

Mar. 31, 2014

Deposits [Abstract]

Deposit Liabilities Disclosures [Text Block]

10. Deposits

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

	March 31,		December 31,
	2014		2013
	(In Thousands)
Non-interest-bearing checking accounts	$	338,412	$	348,943
Interest-bearing checking and money market accounts		740,783		715,939
Savings deposits		199,361		185,121
Retail certificates of deposit less than $100,000		309,758		313,335
Retail certificates of deposit greater than $100,000		172,303		172,454
	$	1,760,617	$	1,735,792

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Subsequent Event (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014
Subsequent Event [Line Items]
Business Exit Costs	$ 786,000

XML

Consolidated Condensed Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest Income
Loans	$ 16,651	$ 16,796
Investment securities:
Taxable	775	678
Non-taxable	752	725
Interest-bearing deposits	101	58
FHLB stock dividends	195	219
Total interest income	18,474	18,476
Interest Expense
Deposits	1,358	1,647
FHLB advances and other	133	90
Subordinated debentures	146	152
Securities sold under repurchase agreements	41	60
Total interest expense	1,678	1,949
Net interest income	16,796	16,527
Provision for loan losses	103	425
Net interest income after provision for loan losses	16,693	16,102
Non-interest Income
Service fees and other charges	2,324	2,385
Insurance commission income	3,030	3,036
Mortgage banking income	1,247	2,830
Gain on sale of non-mortgage loans	3	15
Gain on sale or call of securities	0	53
Trust income	278	206
Income from Bank Owned Life Insurance	219	229
Other non-interest income	225	251
Total non-interest income	7,326	9,005
Non-interest Expense
Compensation and benefits	8,472	8,798
Occupancy	1,588	1,632
FDIC insurance premium	385	656
State franchise tax	495	629
Data processing	1,365	1,181
Amortization of intangibles	289	336
Other non-interest expense	4,067	4,010
Total non-interest expense	16,661	17,242
Income before income taxes	7,358	7,865
Federal income taxes	2,179	2,306
Net Income	$ 5,179	$ 5,559
Earnings per common share (Note 6)
Basic	$ 0.53	$ 0.57
Diluted	$ 0.51	$ 0.55
Dividends declared per share (Note 5)	$ 0.15	$ 0.10
Average common shares outstanding (Note 6)
Basic	9,681	9,736
Diluted	10,108	10,105

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Stock Compensation Plans

3 Months Ended

Mar. 31, 2014

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

4. Stock Compensation Plans

First Defiance has established equity based compensation plans for its directors and employees. On March 15, 2010, the Board adopted, and the shareholders approved at the 2010 Annual Shareholders Meeting, the First Defiance Financial Corp. 2010 Equity Incentive Plan (the “2010 Equity Plan”). The 2010 Equity Plan replaces all existing plans. All awards currently outstanding under prior plans will remain in effect in accordance with their respective terms. Any new awards will be made under the 2010 Equity Plan. The 2010 Equity Plan allows for issuance of up to 350,000 common shares through the award of options, stock grants, restricted stock units (“RSU”), stock appreciation rights or other stock-based awards.

As of March 31, 2014, 240,420 options had been granted and remain outstanding at option prices based on the market value of the underlying shares on the date the options were granted. Options granted under all plans vest 20% per year except for the 2009 grant to the Company’s executive officers, which vested 40% in 2011 and then 20% annually. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date. 

In March 2013, the Company approved a 2013 STIP and a 2013 LTIP for selected members of management.

Under the 2013 STIP the participants may earn up to 25% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The participants are required to be employed on the day of payout in order to receive such payment. The final amount of benefits under the 2013 STIP was determined as of December 31, 2013 and paid out in cash in the first quarter of 2014.

Under the 2013 LTIP the participants may earn up to 25% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three year period. The Company granted 86,065 RSU’s to the participants in this Plan effective January 1, 2013, which represents the maximum target award. The amount of benefit under the 2013 LTIP will be determined individually at the 12 month period ending December 31, 2013, the 24 month period ending December 31, 2014 and the 36 month period ending December 31, 2015. The awards’ vesting will be as follows: 16.7% of the target award after the end of the performance period ending December 31, 2013, 27.8% of the target award at the end of the performance period ending December 31, 2014 and 55.5% of the target award at the end of the performance period ending December 31, 2015. The benefits earned under the 2013 LTIP Plan will be paid out in equity in the first quarter following the close of the applicable performance period. The participants are required to be employed on the day of payout in order to receive such payment. 

In March 2014, the Company approved a 2014 STIP and a 2014 LTIP for selected members of management.

Under the 2014 STIP the participants may earn up to 30% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The final amount of benefits under the 2014 STIP will be determined as of December 31, 2014 and will be paid out in cash in the first quarter of 2015. The participants are required to be employed on the day of payout in order to receive such payment.

Under the 2014 LTIP the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three year period. The Company granted 30,538 RSU’s to the participants in this Plan effective January 1, 2014, which represents the maximum target award. The amount of benefit under the 2014 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2016. The awards’ will vest 100% of the target award at the end of the performance period ending December 31, 2016. The benefits earned under the 2014 LTIP Plan will be paid out in equity in the first quarter following the close of the applicable performance period. The participants are required to be employed on the day of payout in order to receive such payment.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The fair value of stock options granted during the three months ended March 31, 2014 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Three Months ended
	March 31, 2014
Expected average risk-free rate	1.64	%
Expected average life	7.44 years
Expected volatility	44.62	%
Expected dividend yield	2.17	%

The weighted-average fair value of options granted for the three months ended March 31, 2014 was $11.25. There were no options granted in the three months ended March 31, 2013. 

Following is activity under the plans during the three months ended March 31, 2014:

Stock options	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2014		251,020	$	20.76
Forfeited or cancelled		4,050		23.75
Exercised		7,050		11.24
Granted		500		27.59
Options outstanding, March 31, 2014		240,420	$	21.00		2.92	$	1,483
Vested or expected to vest at March 31, 2014		240,420	$	21.11		2.92	$	1,483
Exercisable at March 31, 2014		230,000	$	21.49		2.81	$	1,307

As of March 31, 2014, there was $7,000 of total unrecognized compensation costs related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 4.1 years. 

At March 31, 2014, 99,132 RSU’s and 5,767 stock grants  were outstanding. Compensation expense is recognized over the performance period based on the achievements of targets as established with the plan documents. A total benefit of $45,000 was recorded during the three months ended March 31, 2014 compared to an expense of $273,000 for the same period in 2013. The benefit in the first quarter of 2014 is due to accrual reversals primarily from the 2013 LTIP adjusting for the actual payout in year one as well as adjusting the estimated payouts in year two and three. There was approximately $255,000 included within other liabilities at March 31, 2014 related to the STIPs and LTIPs.

	Restricted Stock Units			Stock Grants
		Weighted-Average				Weighted-Average
		Grant Date				Grant Date
Unvested Shares	Shares	Fair Value		Shares		Fair Value
Unvested at January 1, 2014	106,061	$	18.66		-	$	-
Granted	30,538		25.77		5,767		25.97
Vested	-		-		-		-
Forfeited	(37,467)		18.71		-		-
Unvested at March 31, 2014	99,132	$	21.32		5,767	$	25.97

The maximum amount of compensation expense that may be recorded for the 2014 STIP and the 2012, 2013 and 2014 LTIPs at March 31, 2014 is approximately $3.8 million. However, the estimated expense expected to be recorded as of March 31, 2014 based on the performance measures in the plans, is $2.2 million of which $1.5 million is unrecognized at March 31, 2014 and will be recognized over the remaining performance periods.

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Fair Value

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

3. Fair Value

FASB ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

FASB ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on the best information available. In that regard, FASB ASC Topic 820 established a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

⋅ Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

⋅ Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by a correlation or other means.

⋅ Level 3: Unobservable inputs for determining fair value of assets and liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Available for sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 1 include federal agency preferred stock securities. Securities in Level 2 include U.S. Government agencies, mortgage-backed securities, corporate bonds and municipal securities. The Company classifies its pooled trust preferred collateralized debt obligations as Level 1 and Level 3. The portfolio consists of collateralized debt obligations backed by pools of trust preferred securities issued by financial institutions and insurance companies. The two collateralized debt obligations, which are backed by financial institutions, are allowed under the Volcker Rule and classified as Level 3 based on the lack of observable market data, the Company estimated fair values based on the observable data available and reasonable unobservable market data. The Company estimated fair value based on a discounted cash flow model, which used appropriately adjusted discount rates reflecting credit and liquidity risks. The Company used an independent third party, which is described further in Note 7. 

Impaired loans - Fair values for impaired collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure.  Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value on the cost to replace the current property.  Value of market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investors required return.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell.  Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Real Estate held for sale - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are then reviewed monthly by members of the asset review committee for valuation changes and are accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal.  Appraisal values are discounted from 0% to 20% to account for other factors that may impact the value of collateral. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include:  physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Mortgage servicing rights – On a quarterly basis, mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level based on a model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and are validated against available market data (Level 2).

Mortgage banking derivative - The fair value of mortgage banking derivatives are evaluated monthly based on derivative valuation models using quoted prices for similar assets adjusted for specific attributes of the commitments and other observable market data at the valuation date (Level 2).

The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total Fair
March 31, 2014	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	4,945	$	-	$	4,945
Mortgage-backed - residential		-		42,294		-		42,294
REMICs		-		1,985		-		1,985
Collateralized mortgage obligations		-		67,775		-		67,775
Trust preferred stock		-		-		704		704
Preferred stock		880		-		-		880
Corporate bonds		-		6,961		-		6,961
Obligations of state and political subdivisions		-		83,777		-		83,777
Mortgage banking derivative - asset		-		345		-		345
Mortgage banking derivative - liability		-		-		-		-

	Level 1		Level 2		Level 3		Total Fair
December 31, 2013	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	-	$	4,921	$	-	$	4,921
Mortgage-backed - residential		-		41,292		-		41,292
Collateralized mortgage obligations		-		59,841		-		59,841
Trust preferred stock		1,654		-		582		2,236
Preferred stock		718		-		-		718
Corporate bonds		-		8,942		-		8,942
Obligations of state and political subdivisions		-		80,220				80,220
Mortgage banking derivative - asset		-		295		-		295
Mortgage banking derivative - liability		-		-		-		-

The table below presents a reconciliation and income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2014 and March 31, 2013:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2014	$	582
Total gains or losses (realized/unrealized)
Included in earnings (unrealized)		-
Included in other comprehensive income (presented gross of taxes)		122
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, March 31, 2014	$	704

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2013	$	1,474
Total gains or losses (realized/unrealized)
Included in earnings (unrealized)		-
Included in other comprehensive income (presented gross of taxes)		177
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, March 31, 2013	$	1,651

The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Non-Recurring Basis

							Total Fair
March 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	436	$	436
Multi Family Residential		-		-		320		320
Commercial Real Estate		-		-		7,561		7,561
Commercial loans		-		-		1,800		1,800
Total Impaired loans		-		-		10,117		10,117
Mortgage servicing rights		-		1,255		-		1,255

							Total Fair
December 31, 2013	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	259	$	259
Multi Family Residential		-		-		338		338
Commercial Real Estate		-		-		9,590		9,590
Home Equity and Improvement		-		-		531		531
Total impaired loans		-		-		10,718		10,718
Mortgage servicing rights		-		1,370		-		1,370
Real estate held for sale
Residential		-		-		112		112
CRE		-		-		1,278		1,278
Total Real Estate held for sale		-		-		1,390		1,390

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of March 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
	(Dollars in Thousands)
Trust preferred stock	$	704	Discounted cash flow	Constant prepayment rate		40	%		40	%
				Expected asset default		0-30	%		15	%
				Expected recoveries		10-15	%		10	%
Impaired Loans- Applies to all loan classes	$	10,117	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		0-10	%		10	%

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
	(Dollars in Thousands)
Trust preferred stock	$	582	Discounted cash flow	Constant prepayment rate		40	%		40	%
				Expected asset default		0-30	%		15	%
				Expected recoveries		10-15	%		10	%
Impaired Loans- Applies to all loan classes	$	10,718	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		0-10	%		10	%
Real estate held for sale – Applies to all classes	$	1,390	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		0-20	%		20	%

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a fair value of $10.1 million, with no valuation allowance and a fair value of $10.7 million, with no valuation allowance at March 31, 2014 and December 31, 2013, respectively. A provision expense of $756,000 and $621,000 for the three months ended March 31, 2014 and March 31, 2013, respectively, was included in earnings.

Mortgage servicing rights which are carried at the lower of cost or fair value had a fair value of $1.3 million with a valuation allowance of $1.0 million and a fair value of $1.4 million with a valuation allowance of $1.0 million at March 31, 2014 and December 31, 2013, respectively. A charge of $7,000 and a recovery of $473,000 for the three months ended March 31, 2014 and March 31, 2013, respectively, were included in earnings.

In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of March 31, 2014 and December 31, 2013. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of First Defiance.

Much of the information used to arrive at “fair value” is highly subjective and judgmental in nature and therefore the results may not be precise. Subjective factors include, among other things, estimated cash flows, risk characteristics and interest rates, all of which are subject to change. With the exception of investment securities, the Company’s financial instruments are not readily marketable and market prices do not exist. Since negotiated prices for the instruments, which are not readily marketable depend greatly on the motivation of the buyer and seller, the amounts that will actually be realized or paid per settlement or maturity of these instruments could be significantly different.

The carrying amount of cash and cash equivalents, term notes payable and advance payments by borrowers for taxes and insurance, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

It was not practicable to determine the fair value of Federal Home Loan Bank (“FHLB”) stock due to restrictions placed on its transferability.

The fair value of loans that reprice within 90 days is equal to their carrying amount. For other loans, the estimated fair value is calculated based on discounted cash flow analysis, using interest rates currently being offered for loans with similar terms, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost of fair value as previously described. The allowance for loan losses is considered to be a reasonable adjustment for credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based on binding contracts and quotes from third party investors resulting in a Level 2 classification.

The fair value of accrued interest receivable is equal to the carrying amounts resulting in a Level 2 or Level 3 classification which is consistent with its underlying value.

The fair value of non-interest bearing deposits are considered equal to the amount payable on demand at the reporting date (i.e. carrying value) and are classified as Level 1. The fair value of savings, NOW and certain money market accounts are equal to their carrying amounts and are a Level 2 classification. Fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

The fair values of securities sold under repurchase agreements are equal to their carrying amounts resulting in a Level 2 classification. The carrying value of subordinated debentures and deposits with fixed maturities is estimated based discounted cash flow analyses based on interest rates currently being offered on instruments with similar characteristics and maturities resulting in a Level 3 classification.

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at March 31, 2014.

	Fair Value Measurements at March 31, 2014
	(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	211,183	$	211,183	$	211,183	$	-	$	-
Investment securities		209,699		209,704		880		208,120		704
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,547,941		1,553,255		-		8,838		1,544,417
Accrued interest receivable		6,122		6,122		-		1,231		4,891
Financial Liabilities:
Deposits	$	1,760,617	$	1,762,853	$	338,412	$	1,424,441	$	-
Advances from Federal Home Loan Bank		22,278		22,471		-		22,471		-
Securities sold under repurchase agreements		48,939		48,939		-		48,939		-
Subordinated debentures		36,083		35,261		-		-		35,261

			Fair Value Measurements at December 31, 2013
			(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	179,318	$	179,318	$	179,318	$	-	$	-
Investment securities		198,557		198,563		2,372		195,609		582
Federal Home Loan Bank Stock		19,350		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,564,618		1,568,929		-		9,140		1,559,789
Accrued interest receivable		5,778		5,778		4		696		5,078
Financial Liabilities:
Deposits	$	1,735,792	$	1,738,216	$	348,943	$	1,389,273	$	-
Advances from Federal Home Loan Bank		22,520		22,713		-		22,713		-
Securities sold under repurchase agreements		51,919		51,919		-		51,919		-
Subordinated debentures		36,083		35,237		-		-		35,237

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Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2014

Other Comprehensive Income (Loss), Net Of Tax [Abstract]

Other Comprehensive Income Loss [Text Block]

Note 15 - Other Comprehensive Income (Loss)

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale or call of securities in the accompanying consolidated condensed statements of income.

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
	(In Thousands)
Three months ended March 31, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period	$	1,723	$	603	$	1,120
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive loss	$	1,723	$	603	$	1,120
Three months ended March 31, 2013:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period	$	(664)	$	(235)	$	(429)
Reclassification adjustment for net gains included in net income		(53)		(16)		(37)
Total other comprehensive loss	$	(717)	$	(251)	$	(466)

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

					Accumulated
	Securities		Post-		Other
	Available		retirement		Comprehensive
	For Sale		Benefit		Income
	(In Thousands)
Balance January 1, 2014	$	906	$	(361)	$	545
Other comprehensive loss before reclassifications		1,120		-		1,120
Amounts reclassified from accumulated other comprehensive loss		-		-		-
Net other comprehensive loss during period		1,120		-		1,120
Balance March 31, 2014	$	2,026	$	(361)	$	1,665
Balance January 1, 2013	$	4,851	$	(577)	$	4,274
Other comprehensive loss before reclassifications		(429)		-		(429)
Amounts reclassified from accumulated other comprehensive loss		(37)		-		(37)
Net other comprehensive loss during period		(466)		-		(466)
Balance March 31, 2013	$	4,385	$	(577)	$	3,808

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Borrowings

3 Months Ended

Mar. 31, 2014

Subordinated Borrowings [Abstract]

Subordinated Borrowings Disclosure [Text Block]

11. Borrowings

First Defiance’s debt, FHLB advances and junior subordinated debentures owed to unconsolidated subsidiary trusts are comprised of the following:

	March 31,		December 31,
	2014		2013
	(In Thousands)
FHLB Advances:
Putable advances	$	12,000	$	12,000
Amortizable mortgage advances		10,278		10,520
Total	$	22,278	$	22,520
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

The putable advances can be put back to the Company at the option of the FHLB on a quarterly basis. $12.0 million of the putable advances with a weighted average rate of 2.72% were not yet callable by the FHLB at March 31, 2014. The call dates for these advances range from April 14, 2014 to June 12, 2014 and the maturity dates range from January 14, 2015 to March 12, 2018. Putable advances are callable at the option of the FHLB on a quarterly basis.

In March 2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust II (Trust Affiliate II) 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 Trust Affiliate II. The Company formed Trust Affiliate II 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 Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate II 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 1.5%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was 1.73% as of March 31, 2014 and 1.75% as of December 31, 2013.

The Company also sponsored an affiliated trust, First Defiance Statutory Trust I (Trust Affiliate I), that issued $20 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed 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 Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was 1.61% and 1.63% on March 31, 2014 and December 31, 2013 respectively.

The Trust Preferred Securities issued by Trust Affiliates I and II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into agreements that fully and unconditionally guarantee the Trust Preferred Securities subject to the terms of the guarantees. The Trust Preferred Securities and Subordinated Debentures issued by Trust Affiliate I mature on December 15, 2035 but may be redeemed by the issuer at par after October 28, 2010. The Trust Preferred Securities issued by Trust Affiliate II 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.

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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Investment Securities

3 Months Ended

Mar. 31, 2014

Marketable Securities [Abstract]

Investment [Text Block]

7. Investment Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
At March 31, 2014
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	5,000	$	-	$	(55)	$	4,945
Mortgage-backed securities – residential		42,183		772		(661)		42,294
REMICs		1,998		-		(13)		1,985
Collateralized mortgage obligations		67,721		766		(712)		67,775
Trust preferred securities and preferred stock		1,610		845		(871)		1,584
Corporate bonds		6,869		121		(29)		6,961
Obligations of state and political subdivisions		80,824		3,395		(442)		83,777
Totals	$	206,205	$	5,899	$	(2,783)	$	209,321

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	30	$	-	$	-	$	30
FNMA certificates		115		3		-		118
GNMA certificates		47		2		-		49
Obligations of state and political subdivisions		186		-		-		186
Totals	$	378	$	5	$	-	$	383

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
At December 31, 2013
Available-for-sale
Obligations of U.S. government corporations and agencies	$	5,000	$	-	$	(79)	$	4,921
Mortgage-backed securities - residential		41,368		765		(841)		41,292
Collateralized mortgage obligations		59,865		739		(763)		59,841
Trust preferred stock and preferred stock		3,264		683		(993)		2,954
Corporate bonds		8,854		129		(41)		8,942
Obligations of state and political subdivisions		78,426		2,704		(910)		80,220
Total Available-for-Sale	$	196,777	$	5,020	$	(3,627)	$	198,170

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity*:
FHLMC certificates	$	31	$	-	$	-	$	31
FNMA certificates		120		4		-		124
GNMA certificates		50		2		-		52
Obligations of states and political subdivisions		186		-		-		186
Total Held-to-Maturity	$	387	$	6	$	-	$	393

* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

The amortized cost and fair value of the investment securities portfolio at March 31, 2014 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”) and REMICs, which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,003	$	1,017	$	-	$	-
Due after one year through five years		9,657		9,935		186		186
Due after five years through ten years		36,787		38,491		-		-
Due after ten years		46,856		47,824		-		-
MBS/CMO		111,902		112,054		192		197
	$	206,205	$	209,321	$	378	$	383

Investment securities with a carrying amount of $137.8 million at March 31, 2014 were pledged as collateral on public deposits, securities sold under repurchase agreements, Federal Reserve discount window and FHLB advances.

As of March 31, 2014, the Company’s investment portfolio consisted of 347 securities, 78 of which were in an unrealized loss position.

The following tables summarize First Defiance’s securities that were in an unrealized loss position at March 31, 2014 and December 31, 2013:

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At March 31, 2014
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	1,994	$	(6)	$	2,951	$	(49)	$	4,945	$	(55)
Mortgage-backed securities - residential		20,869		(591)		1,834		(70)		22,703		(661)
REMICs		-		-		1,985		(13)		1,985		(13)
Collateralized mortgage obligations		31,762		(571)		1,714		(141)		33,476		(712)
Obligations of state and political subdivisions		11,235		(297)		2,816		(145)		14,051		(442)
Corporate bonds		-		-		2,971		(29)		2,971		(29)
Trust preferred stock and preferred stock		-		-		704		(871)		704		(871)
Total temporarily impaired securities	$	65,860	$	(1,465)	$	14,975	$	(1,318)	$	80,835	$	(2,783)

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At December 31, 2013
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	4,921	$	(79)	$	-	$	-	$	4,921	$	(79)
Mortgage-backed securities - residential		24,846		(841)		-		-		24,846		(841)
Collateralized mortgage obligations		26,530		(763)		-		-		26,530		(763)
Corporate bonds		2,959		(41)		-		-		2,959		(41)
Obligations of state and political subdivisions		19,209		(871)		375		(39)		19,584		(910)
Trust preferred stock and preferred stock		-		-		582		(993)		582		(993)
Total temporarily impaired securities	$	78,465	$	(2,595)	$	957	$	(1,032)	$	79,422	$	(3,627)

With the exception of the trust preferred securities, the above securities all have fixed interest rates, and all securities have defined maturities. Their fair value is sensitive to movements in market interest rates. First Defiance has the ability and intent to hold these investments for a time necessary to recover the amortized cost without impacting its liquidity position and it is not more than likely that the Company will be required to sell the investments before anticipated recovery.

There were no realized gains from the sales of investment securities in the first quarter of 2014, but there were realized gains of $53,000 ($37,000 after tax) in the first quarter of 2013.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant such an evaluation. The investment portfolio is evaluated for OTTI by segregating the portfolio into two general segments. Investment securities classified as available-for-sale or held-to-maturity are generally evaluated for OTTI under FASB ASC Topic 320. Certain collateralized debt obligations (“CDOs”) are evaluated for OTTI under FASB ASC Topic 325, Investment – Other.

When OTTI occurs under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected compared to the book value of the security and is recognized in earnings. The amount of OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

In the first quarter of 2014 and 2013, management determined there was no OTTI.

The Company held six CDOs at March 31, 2014. Four of those CDOs were written down in full prior to January 1, 2010. The remaining two CDOs have a total amortized cost of $1.6 million at March 31, 2014 and had OTTI in prior periods.

Given the conditions in the debt markets today and the absence of observable transactions in the secondary and new issue markets, the Company’s CDOs will be classified within Level 3 of the fair value hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date.

As required under FASB ASC Topic 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses.

The Company’s CDO valuations were supported by analysis prepared by an independent third party. Their approach to determining fair value involved several steps: 1) detailed credit and structural evaluation of each piece of collateral in the CDO; 2) collateral performance projections for each piece of collateral in the CDO (default, recovery and prepayment/amortization probabilities) and 3) discounted cash flow modeling.

Trust Preferred CDOs Discount Rate Methodology

First Defiance uses market-based yield indicators as a baseline for determining appropriate discount rates, and then adjusts the resulting discount rates on the basis of its credit and structural analysis of specific CDO instruments. The primary focus is on the returns a fixed income investor would require in order to allocate capital on a risk adjusted basis. There is currently no active market for trust preferred CDOs, however, First Defiance looks principally to market yields for stand-alone trust preferred securities issued by banks, thrifts and insurance companies for which there is an active and liquid market. The next step is to make a series of adjustments to reflect the differences that nevertheless exist between these products (both credit and structural) and, most importantly, to reflect idiosyncratic credit performance differences (both actual and projected) between these products and the underlying collateral in the specific CDOs. Importantly, as part of the analysis described above, First Defiance considers the fact that structured instruments frequently exhibit leverage not present in stand-alone instruments, and make adjustments as necessary to reflect this additional risk.

Fundamental to this evaluation is an assessment of the likelihood of CDO coverage test failures that would have the effect of diverting cash flow away from the relevant CDO bond for some period of time. Generally speaking, the Company adjusts indicative credit spreads upwards in the case of CDOs that have relatively weaker collateral and/or less cushion with respect to overcollateralization and interest coverage test ratios and downwards if the reverse is true. This aspect of the Company’s discount rate methodology is important because there is frequently a great difference in the risks present in CDO instruments that are otherwise very similar (i.e. CDOs with the same basic type of collateral, the same manager, the same vintage, etc., may exhibit vastly different performance characteristics). With respect to this last point, First Defiance notes that given today’s credit environment, characterized by high default and deferral rates, it is typically the case that deal-specific credit performance (determined on the basis of the credit characteristics of remaining collateral) is the best indicator of what a willing market participant would pay for an instrument.

The amount of OTTI recognized in accumulated other comprehensive income (“AOCI”) was $566,000 for the above mentioned securities at March 31, 2014. There was $645,000 recognized in AOCI at December 31, 2013.

The following table provides additional information related to the two CDO investments for which a balance remains as of March 31, 2014 (dollars in thousands):

CDO	Class	Amortized Cost		Fair Value		Unrealized Loss		OTTI  Losses 2014		Lowest Rating	Current Number of Banks and Insurance Companies	Actual Deferrals and Defaults as a % of Current Collateral		Expected Deferrals and Defaults as a % of Remaining Performing Collateral		Excess Sub- ordination  as a % of Current Performing Collateral
TPREF Funding II	B		673		305		368		-	Caa3	16	41.10	%	13.48	%	-	%
Preferred Term Sec XXVII	C-1		902		399		503		-	C	32	26.18	%	18.29	%	6.39	%
Total		$	1,575	$	704	$	871	$	-

There were no changes in the accumulated credit losses recognized in earnings for debt securities during the periods ended March 31, 2014 and 2013.

The proceeds from the sales and calls of securities and the associated gains and losses are listed below:

	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Proceeds	$	1,654	$	1,019
Gross realized gains		-		53
Gross realized losses		-		-

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Loans (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	$ 40,202	[1]	$ 46,532	[1]
Recorded Investment, With No Residential Allowance	34,688		39,823
Unpaid Principal Balance, With Related Allowance	17,814	[1]	18,041	[1]
Recorded Investment, With Related Allowance	17,391		17,618
Allowance for Loan Losses Allocated, With Related Allowance	1,341		1,392
Residential Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	4,853	[1]	4,744	[1]
Recorded Investment, With No Residential Allowance	4,771		4,729
Unpaid Principal Balance, With Related Allowance	1,477	[1]	1,100	[1]
Recorded Investment, With Related Allowance	1,477		1,103
Allowance for Loan Losses Allocated, With Related Allowance	175		218
Residential Non Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	4,061	[1]	4,844	[1]
Recorded Investment, With No Residential Allowance	3,967		4,329
Unpaid Principal Balance, With Related Allowance	83	[1]	84	[1]
Recorded Investment, With Related Allowance	83		84
Allowance for Loan Losses Allocated, With Related Allowance	2		2
One To Four Family Residential Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	8,914	[1]	9,588	[1]
Recorded Investment, With No Residential Allowance	8,738		9,058
Unpaid Principal Balance, With Related Allowance	1,560	[1]	1,184	[1]
Recorded Investment, With Related Allowance	1,560		1,187
Allowance for Loan Losses Allocated, With Related Allowance	177		220
Multi Family Residential Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	527	[1]	989	[1]
Recorded Investment, With No Residential Allowance	377		840
Unpaid Principal Balance, With Related Allowance	0	[1]	0	[1]
Recorded Investment, With Related Allowance	0		0
Allowance for Loan Losses Allocated, With Related Allowance	0		0
Commercial Real Estate Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	9,202	[1]	11,105	[1]
Recorded Investment, With No Residential Allowance	6,799		8,376
Unpaid Principal Balance, With Related Allowance	3,153	[1]	3,212	[1]
Recorded Investment, With Related Allowance	2,707		2,765
Allowance for Loan Losses Allocated, With Related Allowance	161		166
Commercial Real Estate Non Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	7,600	[1]	9,399	[1]
Recorded Investment, With No Residential Allowance	6,506		7,740
Unpaid Principal Balance, With Related Allowance	12,592	[1]	12,756	[1]
Recorded Investment, With Related Allowance	12,639		12,803
Allowance for Loan Losses Allocated, With Related Allowance	961		946
Agriculture Land [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	497	[1]	629	[1]
Recorded Investment, With No Residential Allowance	477		488
Unpaid Principal Balance, With Related Allowance	211	[1]	195	[1]
Recorded Investment, With Related Allowance	213		197
Allowance for Loan Losses Allocated, With Related Allowance	7		7
Commercial Real Estate Other Receivables [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	2,305	[1]	3,274	[1]
Recorded Investment, With No Residential Allowance	1,771		2,452
Unpaid Principal Balance, With Related Allowance	80	[1]	82	[1]
Recorded Investment, With Related Allowance	52		53
Allowance for Loan Losses Allocated, With Related Allowance	2		2
Commercial Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	19,604	[1]	24,407	[1]
Recorded Investment, With No Residential Allowance	15,553		19,056
Unpaid Principal Balance, With Related Allowance	16,036	[1]	16,245	[1]
Recorded Investment, With Related Allowance	15,611		15,818
Allowance for Loan Losses Allocated, With Related Allowance	1,131		1,121
Commercial Working Capital [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	3,134	[1]	3,147	[1]
Recorded Investment, With No Residential Allowance	2,610		3,146
Unpaid Principal Balance, With Related Allowance	0	[1]	0	[1]
Recorded Investment, With Related Allowance	0		0
Allowance for Loan Losses Allocated, With Related Allowance	0		0
Commercial Loans Other [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	5,478	[1]	6,063	[1]
Recorded Investment, With No Residential Allowance	4,857		5,415
Unpaid Principal Balance, With Related Allowance	63	[1]	176	[1]
Recorded Investment, With Related Allowance	64		176
Allowance for Loan Losses Allocated, With Related Allowance	10		6
Commercial Loan [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	8,612	[1]	9,210	[1]
Recorded Investment, With No Residential Allowance	7,467		8,561
Unpaid Principal Balance, With Related Allowance	63	[1]	176	[1]
Recorded Investment, With Related Allowance	64		176
Allowance for Loan Losses Allocated, With Related Allowance	10		6
Consumer Loan [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	56	[1]	53	[1]
Recorded Investment, With No Residential Allowance	56		53
Unpaid Principal Balance, With Related Allowance	0	[1]	0	[1]
Recorded Investment, With Related Allowance	0		0
Allowance for Loan Losses Allocated, With Related Allowance	0		0
Home Equity and Home Improvement [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	2,228	[1]	1,985	[1]
Recorded Investment, With No Residential Allowance	2,235		1,992
Unpaid Principal Balance, With Related Allowance	155	[1]	436	[1]
Recorded Investment, With Related Allowance	156		437
Allowance for Loan Losses Allocated, With Related Allowance	23		45
construction [Member]
Impaired loans
Unpaid Principal Balance, With No Residential Allowance	261		300
Recorded Investment, With No Residential Allowance	262		263
Unpaid Principal Balance, With Related Allowance	0		0
Recorded Investment, With Related Allowance	0		0
Allowance for Loan Losses Allocated, With Related Allowance	$ 0		$ 0

[1] Presented gross of charge offs

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Dividends on Common Stock

3 Months Ended

Mar. 31, 2014

Dividends, Common Stock [Abstract]

Dividend On Common Stock [Text Block]

5. Dividends on Common Stock

First Defiance declared and paid a $0.15 per common stock dividend in the first quarter of 2014 and declared and paid a $0.10 per common stock dividend in the first quarter of 2013.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

6. Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share:

	Three months ended March 31,
	2014		2013
	(In Thousands, except per share data)
Numerator for basic and diluted earnings per common share – Net income	$	5,179	$	5,559
Denominator:
Denominator for basic earnings per common share – weighted average common shares		9,681		9,736
Effect of warrants		341		295
Effect of employee stock options		86		74
Denominator for diluted earnings per common share		10,108		10,105
Basic earnings per common share	$	0.53	$	0.57
Diluted earnings per common share	$	0.51	$	0.55

There were 92,250 shares under option granted to employees excluded from the diluted earnings per common share calculation as they were anti-dilutive for the three months ended March 31, 2014. Options to acquire 144,350 shares were excluded from the diluted earnings per common share calculations as they were anti-dilutive for the three months ended March 31, 2013.

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Loans

3 Months Ended

Mar. 31, 2014

Loans Receivable, Net [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

8. Loans

Loans receivable consist of the following: (In Thousands)

	March 31, 2014		December 31, 2013
Real Estate:
Secured by 1-4 family residential	$	196,940	$	195,752
Secured by multi-family residential		152,318		148,952
Secured by commercial real estate		656,753		670,666
Construction		82,049		86,058
		1,088,060		1,101,428
Other Loans:
Commercial		380,144		388,236
Home equity and improvement		106,632		106,930
Consumer Finance		16,346		16,902
		503,122		512,068
Total loans		1,591,182		1,613,496
Deduct:
Undisbursed loan funds		(26,487)		(32,290)
Net deferred loan origination fees and costs		(742)		(758)
Allowance for loan loss		(24,783)		(24,950)
Totals	$	1,539,170	$	1,555,498

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics.

The following table discloses allowance for loan loss activity for the quarter ended March 31, 2014 and 2013 by portfolio segment and impairment method: (In Thousands)

Quarter Ended March 31, 2014	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer Finance		Total
Beginning Allowance	$	2,847	$	2,508	$	12,000	$	134	$	5,678	$	1,635	$	148	$	24,950
Charge-Offs		(228)		0		(228)		0		(525)		(184)		(11)		(1,176)
Recoveries		56		3		722		0		76		31		18		906
Provisions		(36)		104		(507)		4		381		165		(8)		103
Ending Allowance	$	2,639	$	2,615	$	11,987	$	138	$	5,610	$	1,647	$	147	$	24,783

Quarter Ended March 31, 2013	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer Finance		Total
Beginning Specific Allocations	$	3,506	$	2,197	$	12,702	$	75	$	6,325	$	1,759	$	147	$	26,711
Charge-Offs		(206)		0		(266)		0		(205)		(272)		(46)		(995)
Recoveries		99		0		101		0		76		23		19		318
Provisions		34		213		830		(8)		(892)		213		35		425
Ending Allowance	$	3,433	$	2,410	$	13,367	$	67	$	5,304	$	1,723	$	155	$	26,459

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2014: (In Thousands)

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	177	$	-	$	1,131	$	-	$	10	$	23	$	-	$	1,341
Collectively evaluated for impairment		2,462		2,615		10,856		138		5,600		1,624		147		23,442
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,639	$	2,615	$	11,987	$	138	$	5,610	$	1,647	$	147	$	24,783
Loans:
Loans individually evaluated for impairment	$	10,298	$	377	$	31,163	$	262	$	7,531	$	2,391	$	56	$	52,078
Loans collectively evaluated for impairment		187,001		152,125		627,421		55,283		373,756		104,676		16,277		1,516,539
Loans acquired with deteriorated credit quality		27		-		174		-		26		-		-		227
Total ending loans balance	$	197,326	$	152,502	$	658,758	$	55,545	$	381,313	$	107,067	$	16,333	$	1,568,844

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2013: (In Thousands)

	1-4 Family		Multi Family
	Residential		Residential		Commercial						Home Equity		Consumer
	Real Estate		Real Estate		Real Estate		Construction		Commercial		& Improvement		Finance		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	220	$	-	$	1,121	$	-	$	6	$	45	$	-	$	1,392
Collectively evaluated for impairment		2,627		2,508		10,879		134		5,672		1,590		148		23,558
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,847	$	2,508	$	12,000	$	134	$	5,678	$	1,635	$	148	$	24,950
Loans:
Loans individually evaluated for impairment	$	10,245	$	840	$	34,874	$	263	$	8,737	$	2,429	$	53	$	57,441
Loans collectively evaluated for impairment		185,923		148,294		637,657		53,467		380,711		104,958		16,838		1,527,848
Loans acquired with deteriorated credit quality		29		-		174		-		27		-		-		230
Total ending loans balance	$	196,197	$	149,134	$	672,705	$	53,730	$	389,475	$	107,387	$	16,891	$	1,585,519

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans: (In Thousands)

	Three Months Ended March 31, 2014
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,329	$	85	$	83
Residential Non Owner Occupied		4,084		38		38
Total Residential Real Estate		10,413		123		121
Multi-Family		388		1		1
CRE Owner Occupied		9,837		36		35
CRE Non Owner Occupied		19,355		204		204
Agriculture Land		687		3		2
Other CRE		1,862		5		5
Total Commercial Real Estate		31,741		248		246
Construction		261		3		5
Commercial Working Capital		2,924		3		3
Commercial Other		4,959		2		2
Total Commercial		7,883		5		5
Home Equity and Home Improvement		2,439		25		25
Consumer		57		1		1
Total Impaired Loans	$	53,182	$	406	$	404

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans: (In Thousands)

	Three Months Ended March 31, 2013
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,947	$	88	$	86
Residential Non Owner Occupied		4,669		35		35
Total Residential Real Estate		11,616		123		121
Multi-Family		1,444		7		7
CRE Owner Occupied		14,701		62		58
CRE Non Owner Occupied		24,318		203		193
Agriculture Land		926		9		7
Other CRE		5,369		1		1
Total Commercial Real Estate		45,314		275		259
Construction		22		-		-
Commercial Working Capital		1,487		4		5
Commercial Other		6,981		23		22
Total Commercial		8,468		27		27
Home Equity and Home Improvement		2,772		34		32
Consumer		104		2		2
Total Impaired Loans	$	69,740	$	468	$	448

The following table presents loans individually evaluated for impairment by class of loans: (In Thousands)

	March 31, 2014						December 31, 2013
	Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated
With no allowance recorded:
Residential Owner Occupied	$	4,853	$	4,771	$	-	$	4,744	$	4,729	$	-
Residential Non Owner Occupied		4,061		3,967		-		4,844		4,329		-
Total 1-4 Family Residential Real Estate		8,914		8,738		-		9,588		9,058		-
Multi-Family Residential Real Estate		527		377		-		989		840		-
CRE Owner Occupied		9,202		6,799		-		11,105		8,376		-
CRE Non Owner Occupied		7,600		6,506		-		9,399		7,740		-
Agriculture Land		497		477		-		629		488		-
Other CRE		2,305		1,771		-		3,274		2,452		-
Total Commercial Real Estate		19,604		15,553		-		24,407		19,056		-
Construction		261		262		-		300		263		-
Commercial Working Capital		3,134		2,610		-		3,147		3,146		-
Commercial Other		5,478		4,857		-		6,063		5,415		-
Total Commercial		8,612		7,467		-		9,210		8,561		-
Consumer		56		56		-		53		53		-
Home Equity and Home Improvement		2,228		2,235		-		1,985		1,992		-
Total loans with no allowance recorded	$	40,202	$	34,688	$	-	$	46,532	$	39,823	$	-
With an allowance recorded:
Residential Owner Occupied	$	1,477	$	1,477	$	175	$	1,100	$	1,103	$	218
Residential Non Owner Occupied		83		83		2		84		84		2
Total 1-4 Family Residential Real Estate		1,560		1,560		177		1,184		1,187		220
Multi-Family Residential Real Estate		-		-		-		-		-		-
CRE Owner Occupied		3,153		2,707		161		3,212		2,765		166
CRE Non Owner Occupied		12,592		12,639		961		12,756		12,803		946
Agriculture Land		211		213		7		195		197		7
Other CRE		80		52		2		82		53		2
Total Commercial Real Estate		16,036		15,611		1,131		16,245		15,818		1,121
Construction		-		-		-		-		-		-
Commercial Working Capital		-		-		-		-		-		-
Commercial Other		63		64		10		176		176		6
Total Commercial		63		64		10		176		176		6
Consumer		-		-		-		-		-		-
Home Equity and Home Improvement		155		156		23		436		437		45
Total loans with an allowance recorded	$	17,814	$	17,391	$	1,341	$	18,041	$	17,618	$	1,392

* Presented gross of charge offs

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

	March 31, 2014		December 31, 2013
	(In Thousands)
Non-accrual loans	$	26,774	$	27,847
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		26,774		27,847
Real estate and other assets held for sale		6,028		5,859
Total non-performing assets	$	32,802	$	33,706
Troubled debt restructuring, still accruing	$	26,654	$	27,630

The following table presents the aging of the recorded investment in past due and non accrual loans as of March 31, 2014 by class of loans: (In Thousands)

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Residential Owner Occupied	$	130,405	$	469	$	490	$	782	$	1,741	$	1,173
Residential Non Owner Occupied		63,940		196		8		1,036		1,240		1,804
Total 1-4 Family Residential Real Estate		194,345		665		498		1,818		2,981		2,977
Multi-Family Residential Real Estate		152,502		-		-		-		-		450
CRE Owner Occupied		301,710		462		77		3,573		4,112		7,748
CRE Non Owner Occupied		227,516		30		556		2,087		2,673		5,087
Agriculture Land		82,129		105		396		72		573		613
Other Commercial Real Estate		39,630		103		-		312		415		1,786
Total Commercial Real Estate		650,985		700		1,029		6,044		7,773		15,234
Construction		55,545		-		-		-		-		-
Commercial Working Capital		146,532		169		-		392		561		2,471
Commercial Other		230,415		416		22		3,367		3,805		5,259
Total Commercial		376,947		585		22		3,759		4,366		7,730
Consumer Finance		16,287		34		12		-		46		-
Home Equity/Home Improvement		106,127		352		194		394		940		395
Total Loans	$	1,552,738	$	2,336	$	1,755	$	12,015	$	16,106	$	26,786

The following table presents the aging of the recorded investment in past due and non accrual loans as of December 31, 2013 by class of loans: (In Thousands)

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Residential Owner Occupied	$	126,855	$	1,530	$	191	$	1,009	$	2,730	$	1,329
Residential Non Owner Occupied		65,292		531		403		386		1,320		1,943
Total 1-4 Family Residential Real Estate		192,147		2,061		594		1,395		4,050		3,272
Multi-Family Residential Real Estate		149,134		-		-		-		-		583
CRE Owner Occupied		311,253		334		495		3,671		4,500		7,492
CRE Non Owner Occupied		225,433		1,067		918		902		2,887		4,717
Agriculture Land		81,954		21		-		73		94		630
Other Commercial Real Estate		45,297		-		-		1,287		1,287		2,412
Total Commercial Real Estate		663,937		1,422		1,413		5,933		8,768		15,251
Construction		53,730		-		-		-		-		-
Commercial Working Capital		155,373		-		-		419		419		2,917
Commercial Other		230,054		37		26		3,566		3,629		5,419
Total Commercial		385,427		37		26		3,985		4,048		8,336
Consumer Finance		16,759		131				-		131		-
Home Equity/Home Improvement		105,657		1,163		155		413		1,731		413
Total Loans	$	1,566,791	$	4,814	$	2,188	$	11,726	$	18,728	$	27,855

Troubled Debt Restructurings

As of March 31, 2014 and December 31, 2013, the Company has a recorded investment in troubled debt restructurings (“TDRs”) of $32.8 million and $33.4 million, respectively. The Company has allocated $1.2 million of specific reserves to those loans at each of March 31, 2014 and December 31, 2013, and has committed to lend additional amounts totaling up to $3,000 and $300,000 at March 31, 2014 and December 31, 2013, respectively.

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Each TDR is uniquely designed to meet the specific needs of the borrower. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral or an additional guarantor is often requested when granting a concession. Commercial mortgage loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments, and sometimes reducing the interest rate lower than the current market rate. Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended. Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues. All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

Of the loans modified in a TDR, $6.1 million are on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance. Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan. If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off. If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ending March 31, 2014 and March 31, 2013:

	Loans Modified as a TDR for the Three Months Ended March 31, 2014 ($ in thousands)			Loans Modified as a TDR for the Three Months Ended March 31, 2013 ($ in thousands)
Troubled Debt Restructurings	Number of Loans	Recorded Investment (as of period end)		Number of Loans	Recorded Investment (as of period end)
1-4 Family Owner Occupied	9	$	763	4	$	367
1-4 Family Non Owner Occupied	0		-	1		198
CRE Owner Occupied	0		-	1		29
CRE Non Owner Occupied	1		361	0		-
Agriculture Land	0		-	1		219
Other CRE	0		-	0		0
Commercial Working Capital or Other	2		321	1		14
Home Equity and Improvement	3		60	8		492
Consumer Finance	3		11	2		4
Total	18	$	1,516	18	$	1,323

The loans described above decreased the ALLL by $70,000 in the three month period ending March 31, 2014 and by $15,000 in the three month period ending March 31, 2013.

Of the 2014 modifications, 6 were made TDRs due to the fact that the borrower has been in bankruptcy, 3 were made TDRs due to a rate reduction, 1 was made a TDR due to an interest only period, 4 were made TDRs due to extending the amortization, 1 was made a TDR due to a reduction in the payment, 1 was made A TDR due to advancing funds to a substandard credit, and 2 were made to refinance current debt for payment relief.

The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the quarters ending March 31, 2014 and March 31, 2013:

	Three Months Ended March 31, 2014 ($ in thousands)			Three Months Ended March 31, 2013 ($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans	Recorded Investment (as of period end)		Number of Loans	Recorded Investment (as of period end)
1-4 Family Owner Occupied	0	$	-	4	$	312
1-4 Family Non Owner Occupied	0		-	1		198
CRE Owner Occupied	0		-	2		858
CRE Non Owner Occupied	0		-	0		-
Agriculture Land	0		-	0		-
Other CRE	0		-	0		-
Commercial Working Capital or Other	0		-	2		744
Home Equity and Improvement	0		-	4		53
Consumer Finance	0		-	0		-
Total	0	$	-	13	$	2,165

The TDRs that subsequently defaulted described above decreased the allowance for loan losses by $1,000 for the period ended March 31, 2013.

The terms of certain other loans were modified during the period ending March 31, 2014 that did not meet the definition of a TDR. The modification of these loans involved a modification of the terms of a loan to borrowers who were not experiencing financial difficulties. A total of 24 loans were modified under this definition during the three month period ended March 31, 2014.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Credit Quality Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are analyzed individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis. First Defiance uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Not Graded. Loans classified as not graded are generally smaller balance residential real estate, home equity and consumer installment loans which are originated primarily by using an automated underwriting system. These loans are monitored based on their delinquency status and are evaluated individually only if they are seriously delinquent.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of March 31, 2014, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (In Thousands)

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
1-4 Family Owner Occupied	$	3,381	$	17	$	2,068	$	782	$	125,899	$	132,147
1-4 Family Non Owner Occupied		50,472		2,975		5,673		-		6,059		65,179
Total 1-4 Family Real Estate		53,853		2,992		7,741		782		131,958		197,326
Multi-Family Residential Real Estate		148,487		1,761		1,302		-		952		152,502
CRE Owner Occupied		282,897		11,643		9,696		-		1,585		305,821
CRE Non Owner Occupied		200,123		13,014		17,014		-		39		230,190
Agriculture Land		81,229		570		903		-		-		82,702
Other CRE		35,536		918		2,908		-		683		40,045
Total Commercial Real Estate		599,785		26,145		30,521		-		2,307		658,758
Construction		46,059		-		262		-		9,224		55,545
Commercial Working Capital		139,428		4,406		3,260		-		-		147,094
Commercial Other		217,391		10,227		6,601		-		-		234,219
Total Commercial		356,819		14,633		9,861		-		-		381,313
Home Equity and Home Improvement		-		-		546		394		106,127		107,067
Consumer Finance		-		-		46		-		16,287		16,333
Total Loans	$	1,205,003	$	45,531	$	50,279	$	1,176	$	266,855	$	1,568,844

As of December 31, 2013, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (In Thousands)

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
1-4 Family Owner Occupied	$	4,287	$	18	$	3,515	$	-	$	121,765	$	129,585
1-4 Family Non Owner Occupied		51,660		2,894		5,699		-		6,359		66,612
Total 1-4 Family Real Estate		55,947		2,912		9,214		-		128,124		196,197
Multi-Family Residential Real Estate		145,407		875		1,888		-		964		149,134
CRE Owner Occupied		291,770		10,584		11,665		-		1,734		315,753
CRE Non Owner Occupied		200,790		10,254		17,185		-		91		228,320
Agriculture Land		80,418		578		1,051		-		-		82,047
Other CRE		40,676		2,074		3,104		-		731		46,585
Total Commercial Real Estate		613,654		23,490		33,005		-		2,556		672,705
Construction		43,465		-		263		-		10,002		53,730
Commercial Working Capital		148,703		3,429		3,660		-		-		155,792
Commercial Other		219,790		6,994		6,899		-		-		233,683
Total Commercial		368,493		10,423		10,559		-		-		389,475
Home Equity and Home Improvement		-		-		755		45		106,587		107,387
Consumer Finance		-		-		31		-		16,860		16,891
Total Loans	$	1,226,966	$	37,700	$	55,715	$	45	$	265,093	$	1,585,519

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Loans (Details 8) (Subsequently Defaulted [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 Numbers	Mar. 31, 2013 Numbers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	13
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	$ 0	$ 2,165
One To Four Family Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	4
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	312
One To Four Family Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	1
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	198
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	2
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	858
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	0
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	0
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	4
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	53
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	0	0
Other Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	2
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment	$ 0	$ 744

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Loans (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2013 Subsequently Defaulted [Member]	Mar. 31, 2014 Troubled Debt Restructuring [Member]	Dec. 31, 2013 Troubled Debt Restructuring [Member]
Loans [Line Items]
Financing Receivable, Modifications, Recorded Investment				$ 32,800,000	$ 33,400,000
Specified Reserves, Provision for Troubled Debt Restructurings				1,200,000	1,200,000
Loans and Leases Receivable, Impaired, Commitment to Lend				3,000	300,000
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down				6,100,000
Financing Receivable, Allowance for Credit Losses, Period Increase (Increase)	$ 70,000	$ 15,000	$ 1,000

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Loans (Details 7) (Troubled Debt Restructuring [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 Numbers	Mar. 31, 2013 Numbers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	18	18
Troubled Debt Restructurings, Recorded Investment	$ 1,516	$ 1,323
One To Four Family Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	9	4
Troubled Debt Restructurings, Recorded Investment	763	367
One To Four Family Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0	1
Troubled Debt Restructurings, Recorded Investment	0	198
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0	1
Troubled Debt Restructurings, Recorded Investment	0	29
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	1	0
Troubled Debt Restructurings, Recorded Investment	361	0
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0	1
Troubled Debt Restructurings, Recorded Investment	0	219
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0	0
Troubled Debt Restructurings, Recorded Investment	0	0
Other Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	2	1
Troubled Debt Restructurings, Recorded Investment	321	14
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	3	8
Troubled Debt Restructurings, Recorded Investment	60	492
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	3	2
Troubled Debt Restructurings, Recorded Investment	$ 11	$ 4

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Commitments, Guarantees and Contingent Liabilities (Tables)

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of Line of Credit Facilities [Table Text Block]

The Company’s maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of the periods stated below were as follows: (In Thousands)

	March 31, 2014				December 31, 2013
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	35,915	$	51,951	$	57,914	$	59,632
Unused lines of credit		16,958		267,666		18,048		257,939
Standby letters of credit		-		18,052		-		17,680
Total	$	52,873	$	337,669	$	75,962	$	335,251

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Investment Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Investment Securities [Line Items]
Available-for-sale, Due in one year or less, Amortized Cost	$ 1,003
Available-for-sale, Due after one year through five years, Amortized Cost	9,657
Available-for-sale, Due after five years through ten years, Amortized Cost	36,787
Available-for-sale, Due after ten years, Amortized Cost	46,856
Available-for-sale, MBS/CMO, Amortized Cost	111,902
Available-for-sale, Amortized Cost	206,205
Available-for-sale, Due in one year or less, Fair Value	1,017
Available-for-sale, Due after one year through five years, Fair Value	9,935
Available-for-sale, Due after five years through ten years, Fair Value	38,491
Available-for-sale, Due after ten years, Fair Value	47,824
Available-for-sale, MBS/CMO, Fair Value	112,054
Available-for-sale, Fair Value	209,321		198,170
Held-to-maturity, Due after one year through five years, Amortized Cost	186
Held-to-maturity, MBS/CMO, Amortized Cost	192
Held-to-maturity, Amortized Cost	378	[1]	387	[1]
Held-to-maturity, Due after five years through ten years, Fair Value	186
Held-to-maturity, MBS/CMO, Fair Value	197
Held-to-maturity, Fair Value	$ 383	[1]	$ 393	[1]

[1] FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.

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Income Taxes

3 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

13. Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Indiana. The Company is no longer subject to examination by taxing authorities for years before 2009. The Company currently operates primarily in the states of Ohio and Michigan, which tax financial institutions based on their equity rather than their income.

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total Fair
March 31, 2014	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	4,945	$	-	$	4,945
Mortgage-backed - residential		-		42,294		-		42,294
REMICs		-		1,985		-		1,985
Collateralized mortgage obligations		-		67,775		-		67,775
Trust preferred stock		-		-		704		704
Preferred stock		880		-		-		880
Corporate bonds		-		6,961		-		6,961
Obligations of state and political subdivisions		-		83,777		-		83,777
Mortgage banking derivative - asset		-		345		-		345
Mortgage banking derivative - liability		-		-		-		-

	Level 1		Level 2		Level 3		Total Fair
December 31, 2013	Inputs		Inputs		Inputs		Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	-	$	4,921	$	-	$	4,921
Mortgage-backed - residential		-		41,292		-		41,292
Collateralized mortgage obligations		-		59,841		-		59,841
Trust preferred stock		1,654		-		582		2,236
Preferred stock		718		-		-		718
Corporate bonds		-		8,942		-		8,942
Obligations of state and political subdivisions		-		80,220				80,220
Mortgage banking derivative - asset		-		295		-		295
Mortgage banking derivative - liability		-		-		-		-

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The table below presents a reconciliation and income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2014 and March 31, 2013:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2014	$	582
Total gains or losses (realized/unrealized)
Included in earnings (unrealized)		-
Included in other comprehensive income (presented gross of taxes)		122
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, March 31, 2014	$	704

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2013	$	1,474
Total gains or losses (realized/unrealized)
Included in earnings (unrealized)		-
Included in other comprehensive income (presented gross of taxes)		177
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, March 31, 2013	$	1,651

Schedule of Fair Value, Assets Measured on Non Recurring Basis [Table Text Block]

The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Non-Recurring Basis

							Total Fair
March 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	436	$	436
Multi Family Residential		-		-		320		320
Commercial Real Estate		-		-		7,561		7,561
Commercial loans		-		-		1,800		1,800
Total Impaired loans		-		-		10,117		10,117
Mortgage servicing rights		-		1,255		-		1,255

							Total Fair
December 31, 2013	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	259	$	259
Multi Family Residential		-		-		338		338
Commercial Real Estate		-		-		9,590		9,590
Home Equity and Improvement		-		-		531		531
Total impaired loans		-		-		10,718		10,718
Mortgage servicing rights		-		1,370		-		1,370
Real estate held for sale
Residential		-		-		112		112
CRE		-		-		1,278		1,278
Total Real Estate held for sale		-		-		1,390		1,390

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of March 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
	(Dollars in Thousands)
Trust preferred stock	$	704	Discounted cash flow	Constant prepayment rate		40	%		40	%
				Expected asset default		0-30	%		15	%
				Expected recoveries		10-15	%		10	%
Impaired Loans- Applies to all loan classes	$	10,117	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		0-10	%		10	%

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair				Range of			Weighted
	Value		Valuation Technique	Unobservable Inputs	Inputs			Average
	(Dollars in Thousands)
Trust preferred stock	$	582	Discounted cash flow	Constant prepayment rate		40	%		40	%
				Expected asset default		0-30	%		15	%
				Expected recoveries		10-15	%		10	%
Impaired Loans- Applies to all loan classes	$	10,718	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		0-10	%		10	%
Real estate held for sale – Applies to all classes	$	1,390	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		0-20	%		20	%

Fair Value, by Balance Sheet Grouping [Table Text Block]

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at March 31, 2014.

	Fair Value Measurements at March 31, 2014
	(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	211,183	$	211,183	$	211,183	$	-	$	-
Investment securities		209,699		209,704		880		208,120		704
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,547,941		1,553,255		-		8,838		1,544,417
Accrued interest receivable		6,122		6,122		-		1,231		4,891
Financial Liabilities:
Deposits	$	1,760,617	$	1,762,853	$	338,412	$	1,424,441	$	-
Advances from Federal Home Loan Bank		22,278		22,471		-		22,471		-
Securities sold under repurchase agreements		48,939		48,939		-		48,939		-
Subordinated debentures		36,083		35,261		-		-		35,261

			Fair Value Measurements at December 31, 2013
			(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	179,318	$	179,318	$	179,318	$	-	$	-
Investment securities		198,557		198,563		2,372		195,609		582
Federal Home Loan Bank Stock		19,350		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,564,618		1,568,929		-		9,140		1,559,789
Accrued interest receivable		5,778		5,778		4		696		5,078
Financial Liabilities:
Deposits	$	1,735,792	$	1,738,216	$	348,943	$	1,389,273	$	-
Advances from Federal Home Loan Bank		22,520		22,713		-		22,713		-
Securities sold under repurchase agreements		51,919		51,919		-		51,919		-
Subordinated debentures		36,083		35,237		-		-		35,237

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Earnings Per Common Share (Details Textual)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Common Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	92,250	144,350

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Fair Value (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Financial Assets, Carrying Value:
Cash and cash equivalents, Carrying Value	$ 211,183	$ 179,318	$ 156,342	$ 136,832
Investment securities, Carrying Value	209,699	198,557
Federal Home Loan Bank stock, Carrying Value	13,802	19,350
Loans, net, including loans held for sale, Carrying Value	1,547,941	1,564,618
Accrued interest receivable, Carrying Value	6,122	5,778
Financial Liabilities, Carrying Value:
Deposits, Carrying Value	1,760,617	1,735,792
Advances from Federal Home Loan Bank, Carrying Value	22,278	22,520
Securities sold under repurchase agreements, Carrying Value	48,939	51,919
Subordinated debentures, Carrying Value	36,083	36,083
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	211,183	179,318
Investment securities, Fair Value	209,704	198,563
Loans, net, including loans held for sale, Fair Value	1,553,255	1,568,929
Accrued interest receivable, Fair Value	6,122	5,778
Financial Liabilities, Fair Value:
Deposits, Fair Value	1,762,853	1,738,216
Advances from Federal Home Loan Bank, Fair Value	22,471	22,713
Securities sold under repurchase agreements, Fair Value	48,939	51,919
Subordinated debentures, Fair Value	35,261	35,237
Fair Value, Inputs, Level 1 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	211,183	179,318
Investment securities, Fair Value	880	2,372
Loans, net, including loans held for sale, Fair Value	0	0
Accrued interest receivable, Fair Value	0	4
Financial Liabilities, Fair Value:
Deposits, Fair Value	338,412	348,943
Advances from Federal Home Loan Bank, Fair Value	0	0
Securities sold under repurchase agreements, Fair Value	0	0
Subordinated debentures, Fair Value	0	0
Fair Value, Inputs, Level 2 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	0	0
Investment securities, Fair Value	208,120	195,609
Loans, net, including loans held for sale, Fair Value	8,838	9,140
Accrued interest receivable, Fair Value	1,231	696
Financial Liabilities, Fair Value:
Deposits, Fair Value	1,424,441	1,389,273
Advances from Federal Home Loan Bank, Fair Value	22,471	22,713
Securities sold under repurchase agreements, Fair Value	48,939	51,919
Subordinated debentures, Fair Value	0	0
Fair Value, Inputs, Level 3 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	0	0
Investment securities, Fair Value	704	582
Loans, net, including loans held for sale, Fair Value	1,544,417	1,559,789
Accrued interest receivable, Fair Value	4,891	5,078
Financial Liabilities, Fair Value:
Deposits, Fair Value	0	0
Advances from Federal Home Loan Bank, Fair Value	0	0
Securities sold under repurchase agreements, Fair Value	0	0
Subordinated debentures, Fair Value	$ 35,261	$ 35,237

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Consolidated Condensed Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Net income	$ 5,179		$ 5,559
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale	1,723		(664)
Reclassification adjustment for security gains included in net income	0	[1]	(53)	[1]
Income tax benefit (expense)	(603)		251
Total other comprehensive income (loss), Net of Tax Amount	1,120		(466)
Comprehensive income	$ 6,299		$ 5,093

[1] Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended March 31, 2014 and 2013 was $0 and $13, respectively.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant areas where First Defiance uses estimates are the valuation of certain investment securities, the determination of the allowance for loan losses, the valuation of mortgage servicing rights and goodwill, the determination of unrecognized income tax benefits, and the fair value of financial instruments.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for the calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options, warrants, restricted stock awards and stock grants.

Newly Issued but Not Yet Effective Accounting Standards

In January 2014, the FASB issued ASU 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of the amendments in ASU 2014-04 to Topic 310, “Receivables - Troubled Debt Restructurings by Creditors,” is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. An entity can elect to adopt the amendments using either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

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Loans (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 1,341	$ 1,392
Collectively evaluated for impairment	23,442	23,558
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	24,783	24,950
Loans:
Loans individually evaluated for impairment	52,078	57,441
Loans collectively evaluated for impairment	1,516,539	1,527,848
Loans acquired with deteriorated credit quality	227	230
Total ending loans balance	1,568,844	1,585,519
One to Four Family Residential Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	177	220
Collectively evaluated for impairment	2,462	2,627
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	2,639	2,847
Loans:
Loans individually evaluated for impairment	10,298	10,245
Loans collectively evaluated for impairment	187,001	185,923
Loans acquired with deteriorated credit quality	27	29
Total ending loans balance	197,326	196,197
Multi Family Residential Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	2,615	2,508
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	2,615	2,508
Loans:
Loans individually evaluated for impairment	377	840
Loans collectively evaluated for impairment	152,125	148,294
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	152,502	149,134
Commercial Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,131	1,121
Collectively evaluated for impairment	10,856	10,879
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	11,987	12,000
Loans:
Loans individually evaluated for impairment	31,163	34,874
Loans collectively evaluated for impairment	627,421	637,657
Loans acquired with deteriorated credit quality	174	174
Total ending loans balance	658,758	672,705
Commercial Loan [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	10	6
Collectively evaluated for impairment	5,600	5,672
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	5,610	5,678
Loans:
Loans individually evaluated for impairment	7,531	8,737
Loans collectively evaluated for impairment	373,756	380,711
Loans acquired with deteriorated credit quality	26	27
Total ending loans balance	381,313	389,475
Construction Loans [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	138	134
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	138	134
Loans:
Loans individually evaluated for impairment	262	263
Loans collectively evaluated for impairment	55,283	53,467
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	55,545	53,730
Home Equity and Home Improvement [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	23	45
Collectively evaluated for impairment	1,624	1,590
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	1,647	1,635
Loans:
Loans individually evaluated for impairment	2,391	2,429
Loans collectively evaluated for impairment	104,676	104,958
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	107,067	107,387
Consumer Loan [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	147	148
Acquired with deteriorated credit quality	0	0
Total ending allowance balance	147	148
Loans:
Loans individually evaluated for impairment	56	53
Loans collectively evaluated for impairment	16,277	16,838
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	$ 16,333	$ 16,891

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Mortgage Banking (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items]
Residential Mortgage Loans, Unpaid Balance	$ 1,400,000,000		$ 1,400,000,000
Accrual For Estimated Secondary Market Buy Back Losses	92,000	581,000
Accrual Reversal Amount	$ 67,000

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Stock Compensation Plans (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value [Table Text Block]

The fair value of stock options granted during the three months ended March 31, 2014 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Three Months ended
	March 31, 2014
Expected average risk-free rate	1.64	%
Expected average life	7.44 years
Expected volatility	44.62	%
Expected dividend yield	2.17	%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Following is activity under the plans during the three months ended March 31, 2014:

Stock options	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2014		251,020	$	20.76
Forfeited or cancelled		4,050		23.75
Exercised		7,050		11.24
Granted		500		27.59
Options outstanding, March 31, 2014		240,420	$	21.00		2.92	$	1,483
Vested or expected to vest at March 31, 2014		240,420	$	21.11		2.92	$	1,483
Exercisable at March 31, 2014		230,000	$	21.49		2.81	$	1,307

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Restricted Stock Units			Stock Grants
		Weighted-Average				Weighted-Average
		Grant Date				Grant Date
Unvested Shares	Shares	Fair Value		Shares		Fair Value
Unvested at January 1, 2014	106,061	$	18.66		-	$	-
Granted	30,538		25.77		5,767		25.97
Vested	-		-		-		-
Forfeited	(37,467)		18.71		-		-
Unvested at March 31, 2014	99,132	$	21.32		5,767	$	25.97

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Commitments, Guarantees and Contingent Liabilities (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Loss Contingencies [Line Items]
Line of Credit Facility, Period	60 days or less
Commitments and Loans, Available to Sell	$ 14.8	$ 12.1

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Fair Value (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance	$ 582	$ 1,474
Total gains or losses (realized/unrealized)
Total gains or losses (realized/unrealized) Included in earnings (unrealized)	0	0
Total gains or losses (realized/unrealized) Included in other comprehensive income (presented gross of taxes)	122	177
Amortization	0	0
Sales	0	0
Transfers in and/or out of Level 3	0	0
Ending balance	$ 704	$ 1,651

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Commitments, Guarantees and Contingent Liabilities

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments Contingencies and Guarantees [Text Block]

12. Commitments, Guarantees and Contingent Liabilities

Loan commitments are made to accommodate the financial needs of First Federal’s customers; however, there are no long-term, fixed-rate loan commitments that result in market risk. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. They primarily are issued to facilitate customers’ trade transactions.

Both arrangements 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 loans and unused lines of credit) and standby letters of credit outstanding as of the periods stated below were as follows: (In Thousands)

	March 31, 2014				December 31, 2013
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	35,915	$	51,951	$	57,914	$	59,632
Unused lines of credit		16,958		267,666		18,048		257,939
Standby letters of credit		-		18,052		-		17,680
Total	$	52,873	$	337,669	$	75,962	$	335,251

Commitments to make loans are generally made for periods of 60 days or less.

In addition to the above commitments, First Defiance had commitments to sell $14.8 million and $12.1 million of loans to Freddie Mac, Fannie Mae, Federal Home Loan Bank of Cincinnati or BB&T Mortgage at March 31, 2014 and December 31, 2013, respectively.