Loans

3 Months Ended

Mar. 31, 2015

Loans Receivable, Net [Abstract]

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

8. Loans

Loans receivable consist of the following:

	March 31, 2015		December 31, 2014
	(In Thousands)
Real Estate:
Secured by 1-4 family residential	$	203,558	$	206,437
Secured by multi-family residential		159,133		156,530
Secured by commercial real estate		717,343		683,958
Construction		125,144		112,385
		1,205,178		1,159,310
Other Loans:
Commercial		395,378		399,730
Home equity and improvement		110,755		111,813
Consumer Finance		14,967		15,466
		521,100		527,009
Total loans		1,726,278		1,686,319
Deduct:
Undisbursed loan funds		(40,833)		(38,653)
Net deferred loan origination fees and costs		(927)		(880)
Allowance for loan loss		(25,302)		(24,766)
Totals	$	1,659,216	$	1,622,020

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, 2015 and 2014 by portfolio segment (In Thousands):

Quarter Ended March 31, 2015	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	$	2,494	$	2,453	$	11,268	$	221	$	6,509	$	1,704	$	117	$	24,766
Charge-Offs		(78)		0		(155)		0		(2)		(43)		(3)		(281)
Recoveries		19		0		597		0		40		29		12		697
Provisions		48		101		(26)		82		219		(270)		(34)		120
Ending Allowance	$	2,483	$	2,554	$	11,684	$	303	$	6,766	$	1,420	$	92	$	25,302

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

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, 2015 (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	$	260	$	4	$	317	$	-	$	30	$	24	$	5	$	640
Collectively evaluated for impairment		2,223		2,550		11,367		303		6,736		1,396		87		24,662
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,483	$	2,554	$	11,684	$	303	$	6,766	$	1,420	$	92	$	25,302
Loans:
Loans individually evaluated for impairment	$	10,291	$	2,445	$	19,759	$	150	$	5,181	$	2,253	$	39	$	40,118
Loans collectively evaluated for impairment		193,661		156,807		699,773		84,159		391,540		108,968		14,911		1,649,819
Loans acquired with deteriorated credit quality		1		-		163		-		21		-		-		185
Total ending loans balance	$	203,953	$	159,252	$	719,695	$	84,309	$	396,742	$	111,221	$	14,950	$	1,690,122

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, 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	$	216	$	-	$	1,003	$	-	$	30	$	24	$	-	$	1,273
Collectively evaluated for impairment		2,278		2,453		10,265		221		6,479		1,680		117		23,493
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,494	$	2,453	$	11,268	$	221	$	6,509	$	1,704	$	117	$	24,766
Loans:
Loans individually evaluated for impairment	$	10,281	$	2,482	$	28,117	$	150	$	5,739	$	2,242	$	34	$	49,045
Loans collectively evaluated for impairment		196,582		154,178		657,677		73,572		395,270		110,040		15,417		1,602,736
Loans acquired with deteriorated credit quality		1		-		163		-		22		-		-		186
Total ending loans balance	$	206,864	$	156,660	$	685,957	$	73,722	$	401,031	$	112,282	$	15,451	$	1,651,967

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, 2015
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	5,992	$	68	$	68
Residential Non Owner Occupied		4,347		41		40
Total Residential Real Estate		10,339		109		108
Multi-Family		2,463		8		8
CRE Owner Occupied		6,513		37		39
CRE Non Owner Occupied		10,187		133		135
Agriculture Land		760		7		13
Other CRE		2,441		10		9
Total Commercial Real Estate		19,901		187		196
Construction		150		2		2
Commercial Working Capital		1,866		13		13
Commercial Other		3,839		13		18
Total Commercial		5,705		26		31
Home Equity and Home Improvement		2,202		20		20
Consumer		43		-		-
Total Impaired Loans	$	40,803	$	352	$	365

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 loans individually evaluated for impairment by class of loans (In Thousands):

	March 31, 2015						December 31, 2014
	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	$	3,763	$	3,655	$	-	$	3,967	$	3,859	$	-
Residential Non Owner Occupied		3,631		3,624		-		3,763		3,670		-
Total 1-4 Family Residential Real Estate		7,394		7,279		-		7,730		7,529		-
Multi-Family Residential Real Estate		455		307		-		2,627		2,482		-
CRE Owner Occupied		4,197		3,842		-		7,109		6,481		-
CRE Non Owner Occupied		3,226		2,878		-		4,106		3,759		-
Agriculture Land		621		621		-		213		208		-
Other CRE		2,384		2,056		-		2,923		2,378		-
Total Commercial Real Estate		10,428		9,397		-		14,351		12,826		-
Construction		150		150		-		150		150		-
Commercial Working Capital		826		827		-		1,155		1,157		-
Commercial Other		3,544		3,384		-		3,966		3,663		-
Total Commercial		4,370		4,211		-		5,121		4,820		-
Home Equity and Home Improvement		2,205		2,154		-		2,192		2,140		-
Consumer Finance		34		34		-		35		34		-
Total loans with no allowance recorded	$	25,036	$	23,532	$	-	$	32,206	$	29,981	$	-
With an allowance recorded:
Residential Owner Occupied	$	2,305	$	2,306	$	247	$	2,112	$	2,114	$	204
Residential Non Owner Occupied		701		706		13		636		638		12
Total 1-4 Family Residential Real Estate		3,006		3,012		260		2,748		2,752		216
Multi-Family Residential Real Estate		2,141		2,138		4		-		-		-
CRE Owner Occupied		3,025		2,617		152		2,667		2,257		148
CRE Non Owner Occupied		7,324		7,280		152		13,020		12,606		842
Agriculture Land		125		113		3		333		320		10
Other CRE		596		352		10		137		108		3
Total Commercial Real Estate		11,070		10,362		317		16,157		15,291		1,003
Construction		-		-		-		-		-		-
Commercial Working Capital		703		704		22		649		650		21
Commercial Other		263		266		8		264		269		9
Total Commercial		966		970		30		913		919		30
Home Equity and Home Improvement		98		99		24		101		102		24
Consumer Finance		5		5		5		-		-		-
Total loans with an allowance recorded	$	17,286	$	16,586	$	640	$	19,919	$	19,064	$	1,273

* 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, 2015		December 31, 2014
	(In Thousands)
Non-accrual loans	$	18,703	$	24,130
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		18,703		24,130
Real estate and other assets held for sale		6,392		6,181
Total non-performing assets	$	25,095	$	30,311
Troubled debt restructuring, still accruing	$	19,616	$	24,686

The following table presents the aging of the recorded investment in past due and non accrual loans as of March 31, 2015 by class of loans (In Thousands):

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Residential Owner Occupied	$	138,476	$	118	$	242	$	537	$	897	$	1,690
Residential Non Owner Occupied		63,262		378		362		578		1,318		1,548
Total 1-4 Family Residential Real Estate		201,738		496		604		1,115		2,215		3,238
Multi-Family Residential Real Estate		156,869		-		2,138		245		2,383		2,403
CRE Owner Occupied		313,484		1,188		1,513		1,572		4,273		4,377
CRE Non Owner Occupied		262,278		110		-		662		772		1,887
Agriculture Land		98,781		164		-		12		176		462
Other Commercial Real Estate		39,524		-		-		407		407		2,267
Total Commercial Real Estate		714,067		1,462		1,513		2,653		5,628		8,993
Construction		84,309		-		-		-		-		-
Commercial Working Capital		139,101		10		69		340		419		355
Commercial Other		255,899		233		23		1,067		1,323		3,163
Total Commercial		395,000		243		92		1,407		1,742		3,518
Consumer Finance		14,934		16		-		-		16		16
Home Equity/Home Improvement		111,060		75		56		30		161		534
Total Loans	$	1,677,977	$	2,292	$	4,403	$	5,450	$	12,145	$	18,702

The following table presents the aging of the recorded investment in past due and non accrual loans as of December 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	$	141,597	$	39	$	1,079	$	365	$	1,483	$	1,702
Residential Non Owner Occupied		62,991		110		105		578		793		1,625
Total 1-4 Family Residential Real Estate		204,588		149		1,184		943		2,276		3,327
Multi-Family Residential Real Estate		156,413		247		-		-		247		2,546
CRE Owner Occupied		299,500		163		1,566		1,753		3,482		7,004
CRE Non Owner Occupied		243,341		119		416		1,308		1,843		2,582
Agriculture Land		93,529		-		14		-		14		686
Other Commercial Real Estate		43,835		155		-		258		413		2,359
Total Commercial Real Estate		680,205		437		1,996		3,319		5,752		12,631
Construction		73,722		-		-		-		-		-
Commercial Working Capital		135,009		-		-		951		951		1,103
Commercial Other		262,982		67		10		2,012		2,089		3,897
Total Commercial		397,991		67		10		2,963		3,040		5,000
Consumer Finance		15,326		68		57		-		125		12
Home Equity/Home Improvement		110,940		1,236		-		106		1,342		619
Total Loans	$	1,639,185	$	2,204	$	3,247	$	7,331	$	12,782	$	24,135

Troubled Debt Restructurings

As of March 31, 2015 and December 31, 2014, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of $26.9 million and $33.0 million, respectively. The Company allocated $515,000 and $1.1 million of specific reserves to those loans at March 31, 2015 and December 31, 2014, and has committed to lend additional amounts totaling up to $14,000 and $69,000 at March 31, 2015 and December 31, 2014, 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, $7.3 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, 2015 and March 31, 2014:

	Loans Modified as a TDR for the Three Months Ended March 31, 2015 ($ in thousands)				Loans Modified as a TDR for the Three Months Ended March 31, 2014 ($ 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		3	$	228		9	$	763
1-4 Family Non Owner Occupied		4		68		0		-
CRE Owner Occupied		0		-		0		-
CRE Non Owner Occupied		0		-		1		361
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial Working Capital		0		-		2		321
Commercial Other		0		-		0		-
Home Equity and Improvement		3		59		3		60
Consumer Finance		5		10		3		11
Total		15	$	365		18	$	1,516

The loans described above increased the ALLL by $64,000 in the three month period ending March 31, 2015 and decreased the ALLL by $70,000 in the three month period ending March 31, 2014.

Of the 2015 modifications, 6 were made TDRs due to the fact that the borrower has been in bankruptcy, 1 was made TDR due to extending the amortization, 5 were made TDRs due to advancing funds to a substandard credit, and 3 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, 2015 and March 31, 2014:

	Three Months Ended March 31, 2015 ($ in thousands)				Three Months Ended March 31, 2014 ($ 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		1	$	126		0	$	-
1-4 Family Non Owner Occupied		1		104		0		-
CRE Owner Occupied		0		-		0		-
CRE Non Owner Occupied		2		387		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial Working Capital or Other		1		120		0		-
Commercial Other		0		-		0		-
Home Equity and Improvement		0		-		0		-
Consumer Finance		0		-		0		-
Total		5	$	737		0	$	-

The TDRs that subsequently defaulted described above had no affect on the allowance for loan losses for the three month periods ending March 31, 2015 or 2014.

The terms of certain other loans were modified during the period ending March 31, 2015 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 41 loans were modified under this definition during the three month period ended March 31, 2015.

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, 2015, 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	$	3,740	$	128	$	2,745	$	-	$	132,761	$	139,374
1-4 Family Non Owner Occupied		52,352		2,554		4,760		-		4,913		64,579
Total 1-4 Family Real Estate		56,092		2,682		7,505		-		137,674		203,953
Multi-Family Residential Real Estate		155,041		216		3,095		-		900		159,252
CRE Owner Occupied		289,959		18,886		7,862		-		1,050		317,757
CRE Non Owner Occupied		254,234		3,728		5,068		-		20		263,050
Agriculture Land		96,190		1,759		1,008		-		-		98,957
Other CRE		35,867		62		3,455		-		547		39,931
Total Commercial Real Estate		676,250		24,435		17,393		-		1,617		719,695
Construction		72,608		-		150		-		11,551		84,309
Commercial Working Capital		131,327		7,096		1,097		-		-		139,520
Commercial Other		246,539		6,144		4,539		-		-		257,222
Total Commercial		377,866		13,240		5,636		-		-		396,742
Home Equity and Home Improvement		-		-		617		-		110,604		111,221
Consumer Finance		-		-		36		-		14,914		14,950
Total Loans	$	1,337,857	$	40,573	$	34,432	$	-	$	277,260	$	1,690,122

As of December 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	$	4,230	$	131	$	3,048	$	365	$	135,306	$	143,080
1-4 Family Non Owner Occupied		51,327		2,404		4,872		7		5,174		63,784
Total 1-4 Family Real Estate		55,557		2,535		7,920		372		140,480		206,864
Multi-Family Residential Real Estate		152,290		220		3,236		-		914		156,660
CRE Owner Occupied		273,406		18,448		9,953		-		1,175		302,982
CRE Non Owner Occupied		224,073		7,898		13,186		-		27		245,184
Agriculture Land		90,875		1,849		819		-		-		93,543
Other CRE		40,147		63		3,466		-		572		44,248
Total Commercial Real Estate		628,501		28,258		27,424		-		1,774		685,957
Construction		62,355		-		150		-		11,217		73,722
Commercial Working Capital		128,229		6,287		1,444		-		-		135,960
Commercial Other		253,576		6,504		4,991		-		-		265,071
Total Commercial		381,805		12,791		6,435		-		-		401,031
Home Equity and Home Improvement		-		-		1,647		106		110,529		112,282
Consumer Finance		-		-		125		-		15,326		15,451
Total Loans	$	1,280,508	$	43,804	$	46,937	$	478	$	280,240	$	1,651,967

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $28,000 as of March 31, 2015.