|
NEWS RELEASE
Contact: Donald P. Hileman President and CEO (419) 782-5104 dhileman@first-fed.com |
| For Immediate Release | Exhibit 99.1 |
FIRST DEFIANCE FINANCIAL CORP. ANNOUNCES 2015
SECOND QUARTER EARNINGS
| · | Earnings per share of $0.70 for 2015 second quarter up from $0.57 in 2014 second quarter |
| · | Net income of $6.6 million for 2015 second quarter up from $5.7 million in the 2014 second quarter |
| · | Return on average assets of 1.19%, up from 1.05% in the 2014 second quarter |
| · | Net interest margin of 3.81%, up from 3.62% in the 2014 second quarter |
| · | Loans up $123.7 million, or 7.8% from 2014 second quarter |
| · | Non-performing loans down 32.7% from 2014 second quarter |
DEFIANCE, OHIO (July 20, 2015) – First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the second quarter ended June 30, 2015 totaled $6.6 million, or $0.70 per diluted common share, compared to $5.7 million or $0.57 per diluted common share for the quarter ended June 30, 2014.
“Our financial performance remained very strong in the second quarter” said Donald P. Hileman, President, and Chief Executive Officer of First Defiance Financial Corp. “Our diluted earnings per share growth of 23% over second quarter last year shows that our strategies for revenue growth, efficiency improvement, asset quality enhancement and effective capital management are delivering measurable results.”
Net Interest Income up compared to second quarter 2014
Net interest income of $18.4 million in the second quarter of 2015 was up from $17.1 million in the second quarter of 2014. Net interest margin was 3.81% for the second quarter of 2015, down from 3.88% in the first quarter of 2015, but up from 3.62% in the second quarter of 2014. Yield on interest earning assets increased by 19 basis points, to 4.15% in the second quarter of 2015 from 3.96% in the second quarter of 2014. The cost of interest-bearing liabilities increased by 1 basis point in the second quarter of 2015 to 0.44% from 0.43% in the second quarter of 2014.
“Continuing the trend from last quarter, loan demand remained steady in our markets enabling us to maintain a strong earning asset mix and net interest margin, much improved from a year ago.” said Hileman. “Our net interest income rose $1.2 million, or 7.2% over the second quarter last year.”
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Non-Interest Income up from second quarter 2014
First Defiance’s non-interest income for the second quarter of 2015 was $7.8 million compared with $7.6 million in the second quarter of 2014. The second quarter of 2015 had no gains or losses on the sale of securities, while the second quarter of 2014 included gains of $471,000.
Mortgage banking income increased to $1.8 million in the second quarter of 2015, up from $1.5 million in the second quarter of 2014. Mortgage banking activity was significantly elevated from the second quarter a year ago, with our markets experiencing higher purchase and refinance loan volumes. Gains from the sale of mortgage loans increased in the second quarter of 2015 to $1.2 million from $1.0 million in the second quarter of 2014. Mortgage loan servicing revenue was $852,000 in the second quarter of 2015, down slightly from $878,000 in the second quarter of 2014. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $141,000 in the second quarter of 2015 compared with a positive adjustment of $44,000 in the second quarter of 2014.
For the second quarter of 2015, commissions from the sale of insurance products was $2.3 million, up from $2.2 million in the second quarter of 2014, and service fees and other charges were $2.7 million, up from $2.5 million in the second quarter of 2014. Trust income was $367,000 in the second quarter of 2015, up 21.5% from $302,000 in the second quarter of 2014.
“We are very pleased with the positive impact of our mortgage banking performance this quarter which included mortgage origination volumes up 49% from the prior year. In addition, service fees, insurance commissions and trust income all reflected solid increases over the second quarter last year,” continued Hileman. “Total non-interest income, excluding securities gains, rose 9.3% in the second quarter over the prior year.”
Non-Interest Expenses up from second quarter 2014
Total non-interest expense was $16.8 million in the second quarter of 2015, an increase from $16.4 million in the second quarter of 2014. Compensation and benefits increased to $9.2 million in the second quarter of 2015 compared to $8.7 in the second quarter of 2014. The increase in compensation and benefits from a year ago is mainly related to merit increases and higher incentive compensation accruals partially offset by lower medical insurance costs. Occupancy expense was $1.8 million in the second quarter 2015, up from $1.7 million in the second quarter of 2014. Data processing cost increased to $1.6 million in the second quarter of 2015 from $1.5 million in the second quarter of 2014. Other non-interest expense of $3.3 million in the second quarter of 2015 was essentially even with the second quarter of 2014.
Credit Quality
Non-performing loans totaled $16.7 million at June 30, 2015, a decrease from $24.9 million at June 30, 2014. In addition, First Defiance had $5.4 million of real estate owned at June 30, 2015 compared to $5.6 million at June 30, 2014. Accruing troubled debt restructured loans were $22.2 million at June 30, 2015 compared with $27.0 million at June 30, 2014. For the second quarter of 2015, First Defiance recorded net recoveries of $82,000, compared to net charge-offs of $602,000 in the second quarter of 2014. The allowance for loan loss as a percentage of total loans was 1.49% at June 30, 2015 compared with 1.56% at June 30, 2014.
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The second quarter results include no provision for loan losses compared with $446,000 of expense for the same period in 2014.
“Our asset quality strengthened with declines in both non-performing loans and other real estate in the second quarter, continuing the improvement in our asset quality metrics,” said Hileman. “We now have over 150% allowance for loan losses coverage of our non-performing loans.”
Year-To-Date Results
For the six-month period ended June 30, 2015, net interest income totaled $36.6 million compared with $33.9 million in the first six months of 2014. Average interest-earning assets increased to $1.975 billion in the first six months of 2015, compared to $1.945 billion in the first six months of 2014. Net interest margin for the first six months of 2015 was 3.84%, up 22 basis points from the 3.62% margin reported in the six month period ended June 30, 2014.
The provision for loan losses in the first six months of 2015 was $120,000, compared to $549,000 recorded during the first six months of 2014.
Non-interest income for the first six months of 2015 was $16.1 million, compared to $14.9 million during the same period of 2014. Service fees and other charges were $5.2 million for the first six months of 2015, up from $4.8 million during the same period of 2014. Mortgage banking income increased to $3.6 million for the first six months of 2015, compared with $2.8 million during the same period of 2014. Insurance commissions rose to $5.5 million for the first six months of 2015, compared with $5.3 million for same period of 2014. Non-interest income for the first six months of 2015 included no gains or losses on the sale of securities compared with gains of $471,000 during the same period of 2014.
Non-interest expense was $33.7 million for the first six months of 2015, up from $33.0 million for the same period of 2014. Compensation and benefits expense was $18.1 million for the first six months of 2015 compared with $17.2 million during the same period of 2014. The increase in compensation and benefits over the prior year is mainly related to merit increases and higher incentive compensation accruals partially offset by lower medical insurance costs. Increases in occupancy of $281,000 and data processing of $277,000 were offset by decreases in FDIC insurance premiums of $68,000, financial institutions taxes of $116,000, amortization of intangibles of $184,000 and other expenses of $438,000, which included a $786,000 cost recorded in the first quarter of 2014 for terminating a merger agreement.
Total Assets at $2.2 Billion
Total assets at June 30, 2015 were $2.20 billion compared to $2.18 billion at December 31, 2014 and $2.15 billion at June 30, 2014. Net loans receivable (excluding loans held for sale) were $1.68 billion at June 30, 2015 compared to $1.62 billion at December 31, 2014 and $1.56 billion at June 30, 2014. Total cash and cash equivalents were $65.6 million at June 30, 2015 compared with $112.9 million at December 31, 2014 and $156.2 million at June 30, 2014. Also, at June 30, 2015, goodwill and other intangible assets totaled $63.5 million compared to $63.9 million at December 31, 2014 and $64.5 million at June 30, 2014.
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Total deposits at June 30, 2015 were $1.76 billion compared with $1.76 billion at December 31, 2014, and $1.74 billion at June 30, 2014. Non-interest bearing deposits at June 30, 2015 were $379.0 million compared to $379.6 million at December 31, 2014 and $355.3 million at June 30, 2014. Total stockholders’ equity was $276.0 million at June 30, 2015 compared to $279.5 million at December 31, 2014 and $276.4 million at June 30, 2014.
The reduction in stockholders’ equity from year-end 2014 includes the $12 million cost of the March 11, 2015 repurchase of the warrant issued to the U.S. Treasury under the TARP Capital Purchase Program.
Dividend to be paid August 28
The Board of Directors declared a quarterly cash dividend of $0.20 per common share payable August 28, 2015 to shareholders of record at the close of business on August 21, 2015. The dividend represents an annual dividend of 2.18 percent based on the First Defiance common stock closing price on July 17, 2015. First Defiance has approximately 9,276,983 common shares outstanding.
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, July 21, 2015 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. In addition, a live webcast may be accessed at http://services.choruscall.com/links/ fdef150721.html.
Audio replay of the Internet Webcast will be available at www.fdef.com until August 21, 2015 at 9:00 a.m. ET
First Defiance Financial Corp.
First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal operates 33 full-service branches and 41 ATM locations in northwest Ohio, southeast Michigan and northeast Indiana and a loan production office in Columbus, Ohio. First Insurance Group is a full-service insurance agency with five offices throughout northwest Ohio.
For more information, visit the company’s Web site at www.fdef.com.
Financial Statements and Highlights Follow-
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Safe Harbor Statement
This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which First Defiance and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2014. One or more of these factors have affected or could in the future affect First Defiance's business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by First Defiance or any other persons, that our objectives and plans will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of First Defiance. We assume no obligation to update any forward-looking statements.
As required by U.S. GAAP, First Defiance will evaluate the impact of subsequent events through the issuance date of its June 30, 2015 consolidated financial statements as part of its Quarterly Report on Form 10-Q to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.
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Consolidated Balance Sheets (Unaudited)
First Defiance Financial Corp.
| June 30, | December 31, | |||||||
| (in thousands) | 2015 | 2014 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Cash and amounts due from depository institutions | $ | 33,586 | $ | 41,936 | ||||
| Interest-bearing deposits | 32,000 | 71,000 | ||||||
| 65,586 | 112,936 | |||||||
| Securities | ||||||||
| Available-for sale, carried at fair value | 237,012 | 239,321 | ||||||
| Held-to-maturity, carried at amortized cost | 257 | 313 | ||||||
| 237,269 | 239,634 | |||||||
| Loans | 1,705,716 | 1,646,786 | ||||||
| Allowance for loan losses | (25,384 | ) | (24,766 | ) | ||||
| Loans, net | 1,680,332 | 1,622,020 | ||||||
| Loans held for sale | 9,793 | 4,535 | ||||||
| Mortgage servicing rights | 9,128 | 9,012 | ||||||
| Accrued interest receivable | 6,204 | 6,037 | ||||||
| Federal Home Loan Bank stock | 13,802 | 13,802 | ||||||
| Bank Owned Life Insurance | 51,433 | 47,013 | ||||||
| Office properties and equipment | 39,393 | 40,496 | ||||||
| Real estate and other assets held for sale | 5,371 | 6,181 | ||||||
| Goodwill | 61,525 | 61,525 | ||||||
| Core deposit and other intangibles | 2,016 | 2,395 | ||||||
| Deferred Taxes | 69 | - | ||||||
| Other assets | 14,589 | 13,366 | ||||||
| Total Assets | $ | 2,196,510 | $ | 2,178,952 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Non-interest-bearing deposits | $ | 378,970 | $ | 379,552 | ||||
| Interest-bearing deposits | 1,384,420 | 1,381,261 | ||||||
| Total deposits | 1,763,390 | 1,760,813 | ||||||
| Advances from Federal Home Loan Bank | 41,050 | 21,544 | ||||||
| Notes payable and other interest-bearing liabilities | 54,237 | 54,759 | ||||||
| Subordinated debentures | 36,083 | 36,083 | ||||||
| Advance payments by borrowers for tax and insurance | 2,492 | 2,309 | ||||||
| Deferred Taxes | - | 1,176 | ||||||
| Other liabilities | 23,230 | 22,763 | ||||||
| Total Liabilities | 1,920,482 | 1,899,447 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock | - | - | ||||||
| Common stock, net | 127 | 127 | ||||||
| Common stock warrant | - | 878 | ||||||
| Additional paid-in-capital | 125,231 | 136,266 | ||||||
| Accumulated other comprehensive income | 2,594 | 4,114 | ||||||
| Retained earnings | 210,169 | 200,600 | ||||||
| Treasury stock, at cost | (62,093 | ) | (62,480 | ) | ||||
| Total stockholders’ equity | 276,028 | 279,505 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 2,196,510 | $ | 2,178,952 | ||||
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Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
| Interest Income: | ||||||||||||||||
| Loans | $ | 18,139 | $ | 16,878 | $ | 36,026 | $ | 33,529 | ||||||||
| Investment securities | 1,721 | 1,608 | 3,413 | 3,135 | ||||||||||||
| Interest-bearing deposits | 41 | 118 | 80 | 219 | ||||||||||||
| FHLB stock dividends | 136 | 170 | 275 | 365 | ||||||||||||
| Total interest income | 20,037 | 18,774 | 39,794 | 37,248 | ||||||||||||
| Interest Expense: | ||||||||||||||||
| Deposits | 1,312 | 1,327 | 2,584 | 2,685 | ||||||||||||
| FHLB advances and other | 173 | 133 | 283 | 266 | ||||||||||||
| Subordinated debentures | 150 | 146 | 297 | 292 | ||||||||||||
| Notes Payable | 37 | 39 | 75 | 80 | ||||||||||||
| Total interest expense | 1,672 | 1,645 | 3,239 | 3,323 | ||||||||||||
| Net interest income | 18,365 | 17,129 | 36,555 | 33,925 | ||||||||||||
| Provision for loan losses | - | 446 | 120 | 549 | ||||||||||||
| Net interest income after provision for loan losses | 18,365 | 16,683 | 36,435 | 33,376 | ||||||||||||
| Non-interest Income: | ||||||||||||||||
| Service fees and other charges | 2,690 | 2,508 | 5,219 | 4,832 | ||||||||||||
| Mortgage banking income | 1,793 | 1,540 | 3,568 | 2,787 | ||||||||||||
| Gain on sale of non-mortgage loans | 197 | 36 | 233 | 39 | ||||||||||||
| Gain on sale of securities | - | 471 | - | 471 | ||||||||||||
| Insurance commissions | 2,344 | 2,244 | 5,483 | 5,274 | ||||||||||||
| Trust income | 367 | 302 | 725 | 580 | ||||||||||||
| Income from Bank Owned Life Insurance | 212 | 235 | 420 | 454 | ||||||||||||
| Other non-interest income | 206 | 281 | 443 | 506 | ||||||||||||
| Total Non-interest Income | 7,809 | 7,617 | 16,091 | 14,943 | ||||||||||||
| Non-interest Expense: | ||||||||||||||||
| Compensation and benefits | 9,182 | 8,709 | 18,105 | 17,181 | ||||||||||||
| Occupancy | 1,809 | 1,704 | 3,573 | 3,292 | ||||||||||||
| FDIC insurance premium | 319 | 353 | 670 | 738 | ||||||||||||
| Financial institutions tax | 411 | 514 | 893 | 1,009 | ||||||||||||
| Data processing | 1,599 | 1,479 | 3,121 | 2,844 | ||||||||||||
| Amortization of intangibles | 162 | 274 | 379 | 563 | ||||||||||||
| Other non-interest expense | 3,314 | 3,324 | 6,953 | 7,391 | ||||||||||||
| Total Non-interest Expense | 16,796 | 16,357 | 33,694 | 33,018 | ||||||||||||
| Income before income taxes | 9,378 | 7,943 | 18,832 | 15,301 | ||||||||||||
| Income taxes | 2,815 | 2,254 | 5,668 | 4,433 | ||||||||||||
| Net Income | $ | 6,563 | $ | 5,689 | $ | 13,164 | $ | 10,868 | ||||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 0.71 | $ | 0.59 | $ | 1.42 | $ | 1.13 | ||||||||
| Diluted | $ | 0.70 | $ | 0.57 | $ | 1.39 | $ | 1.08 | ||||||||
| Average Shares Outstanding: | ||||||||||||||||
| Basic | 9,268 | 9,607 | 9,251 | 9,644 | ||||||||||||
| Diluted | 9,349 | 10,066 | 9,483 | 10,096 | ||||||||||||
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Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2015 | 2014 | % change | 2015 | 2014 | % change | ||||||||||||||||||
| Summary of Operations | ||||||||||||||||||||||||
| Tax-equivalent interest income (1) | $ | 20,516 | $ | 19,221 | 6.7 | % | $ | 40,737 | $ | 38,121 | 6.9 | % | ||||||||||||
| Interest expense | 1,672 | 1,645 | 1.6 | 3,239 | 3,323 | (2.5 | ) | |||||||||||||||||
| Tax-equivalent net interest income (1) | 18,844 | 17,576 | 7.2 | 37,498 | 34,798 | 7.8 | ||||||||||||||||||
| Provision for loan losses | - | 446 | NM | 120 | 549 | (78.1 | ) | |||||||||||||||||
| Tax-equivalent NII after provision for loan loss (1) | 18,844 | 17,130 | 10.0 | 37,378 | 34,249 | 9.1 | ||||||||||||||||||
| Investment Securities gains | - | 471 | NM | - | 471 | NM | ||||||||||||||||||
| Non-interest income (excluding securities gains/losses) | 7,809 | 7,146 | 9.3 | 16,091 | 14,472 | 11.2 | ||||||||||||||||||
| Non-interest expense | 16,796 | 16,357 | 2.7 | 33,694 | 33,018 | 2.0 | ||||||||||||||||||
| Income taxes | 2,815 | 2,254 | 24.9 | 5,668 | 4,433 | 27.9 | ||||||||||||||||||
| Net Income | 6,563 | 5,689 | 15.4 | 13,164 | 10,868 | 21.1 | ||||||||||||||||||
| Tax equivalent adjustment (1) | 479 | 447 | 7.2 | 943 | 873 | 8.0 | ||||||||||||||||||
| At Period End | ||||||||||||||||||||||||
| Assets | 2,196,510 | 2,151,490 | 2.1 | |||||||||||||||||||||
| Earning assets | 1,998,580 | 1,949,729 | 2.5 | |||||||||||||||||||||
| Loans | 1,705,716 | 1,581,984 | 7.8 | |||||||||||||||||||||
| Allowance for loan losses | 25,384 | 24,627 | 3.1 | |||||||||||||||||||||
| Deposits | 1,763,390 | 1,741,812 | 1.2 | |||||||||||||||||||||
| Stockholders’ equity | 276,028 | 276,449 | (0.2 | ) | ||||||||||||||||||||
| Average Balances | ||||||||||||||||||||||||
| Assets | 2,212,603 | 2,165,486 | 2.2 | 2,196,281 | 2,155,927 | 1.9 | ||||||||||||||||||
| Earning assets | 1,991,830 | 1,952,440 | 2.0 | 1,975,146 | 1,944,793 | 1.6 | ||||||||||||||||||
| Loans | 1,673,750 | 1,551,799 | 7.9 | 1,660,404 | 1,548,351 | 7.2 | ||||||||||||||||||
| Deposits and interest-bearing liabilities | 1,909,372 | 1,865,824 | 2.3 | 1,890,622 | 1,859,074 | 1.7 | ||||||||||||||||||
| Deposits | 1,780,912 | 1,756,098 | 1.4 | 1,770,647 | 1,748,668 | 1.3 | ||||||||||||||||||
| Stockholders’ equity | 274,239 | 276,490 | (0.8 | ) | 277,078 | 275,118 | 0.7 | |||||||||||||||||
| Stockholders’ equity / assets | 12.39 | % | 12.77 | % | (2.9 | ) | 12.62 | % | 12.76 | % | (1.1 | ) | ||||||||||||
| Per Common Share Data | ||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||
| Basic | $ | 0.71 | $ | 0.59 | 20.3 | $ | 1.42 | $ | 1.13 | 25.7 | ||||||||||||||
| Diluted | 0.70 | 0.57 | 22.8 | 1.39 | 1.08 | 28.7 | ||||||||||||||||||
| Dividends | 0.20 | 0.15 | 33.3 | 0.375 | 0.30 | 25.0 | ||||||||||||||||||
| Market Value: | ||||||||||||||||||||||||
| High | $ | 38.21 | $ | 29.00 | 31.8 | $ | 38.21 | $ | 29.00 | 31.8 | ||||||||||||||
| Low | 32.42 | 26.50 | 22.3 | 29.05 | 24.24 | 19.8 | ||||||||||||||||||
| Close | 37.53 | 28.70 | 30.8 | 37.53 | 28.70 | 30.8 | ||||||||||||||||||
| Common Book Value | 29.76 | 28.96 | 2.8 | 29.76 | 28.96 | 2.8 | ||||||||||||||||||
| Tangible Common Book Value | 22.91 | 22.19 | 3.3 | 22.91 | 22.19 | 3.3 | ||||||||||||||||||
| Shares outstanding, end of period (000) | 9,275 | 9,515 | (2.5 | ) | 9,275 | 9,515 | (2.5 | ) | ||||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||||||
| Tax-equivalent net interest margin (1) | 3.81 | % | 3.62 | % | 5.3 | 3.84 | % | 3.62 | % | 6.3 | ||||||||||||||
| Return on average assets | 1.19 | % | 1.05 | % | 12.9 | 1.21 | % | 1.02 | % | 18.9 | ||||||||||||||
| Return on average equity | 9.60 | % | 8.25 | % | 16.3 | 9.58 | % | 7.97 | % | 20.3 | ||||||||||||||
| Efficiency ratio (2) | 63.02 | % | 66.16 | % | (4.8 | ) | 62.87 | % | 67.01 | % | (6.2 | ) | ||||||||||||
| Effective tax rate | 30.02 | % | 28.38 | % | 5.8 | 30.10 | % | 28.97 | % | 3.9 | ||||||||||||||
| Dividend payout ratio (basic) | 28.17 | % | 25.42 | % | 10.8 | 26.41 | % | 26.55 | % | (0.5 | ) | |||||||||||||
| (1) | Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35% |
| (2) | Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains or losses, net. |
NM Percentage change not meaningful
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Income from Mortgage Banking
Revenue from sales and servicing of mortgage loans consisted of the following:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (dollars in thousands) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
| Gain from sale of mortgage loans | $ | 1,246 | $ | 986 | $ | 2,531 | $ | 1,628 | ||||||||
| Mortgage loan servicing revenue (expense): | ||||||||||||||||
| Mortgage loan servicing revenue | 852 | 878 | 1,727 | 1,782 | ||||||||||||
| Amortization of mortgage servicing rights | (446 | ) | (368 | ) | (857 | ) | (660 | ) | ||||||||
| Mortgage servicing rights valuation adjustments | 141 | 44 | 167 | 37 | ||||||||||||
| 547 | 554 | 1,037 | 1,159 | |||||||||||||
| Total revenue from sale and servicing of mortgage loans | $ | 1,793 | $ | 1,540 | $ | 3,568 | $ | 2,787 | ||||||||
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Yield Analysis
First Defiance Financial Corp.
| Three Months Ended June 30, | ||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| 2015 | 2014 | |||||||||||||||||||||||
| Average | Yield | Average | Yield | |||||||||||||||||||||
| Balance | Interest(1) | Rate(2) | Balance | Interest(1) | Rate(2) | |||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Loans receivable | $ | 1,673,750 | $ | 18,186 | 4.36 | % | $ | 1,551,799 | $ | 16,918 | 4.37 | % | ||||||||||||
| Securities | 245,539 | 2,153 | 3.63 | % | 217,848 | 2,015 | 3.79 | % | ||||||||||||||||
| Interest Bearing Deposits | 58,739 | 41 | 0.28 | % | 168,991 | 118 | 0.28 | % | ||||||||||||||||
| FHLB stock | 13,802 | 136 | 3.95 | % | 13,802 | 170 | 4.94 | % | ||||||||||||||||
| Total interest-earning assets | 1,991,830 | 20,516 | 4.15 | % | 1,952,440 | 19,221 | 3.96 | % | ||||||||||||||||
| Non-interest-earning assets | 220,773 | 213,046 | ||||||||||||||||||||||
| Total assets | $ | 2,212,603 | $ | 2,165,486 | ||||||||||||||||||||
| Deposits and Interest-bearing liabilities: | ||||||||||||||||||||||||
| Interest bearing deposits | $ | 1,397,966 | $ | 1,312 | 0.38 | % | $ | 1,407,795 | $ | 1,327 | 0.38 | % | ||||||||||||
| FHLB advances and other | 39,578 | 173 | 1.75 | % | 22,116 | 133 | 2.41 | % | ||||||||||||||||
| Subordinated debentures | 36,128 | 150 | 1.67 | % | 36,132 | 146 | 1.62 | % | ||||||||||||||||
| Notes payable | 52,754 | 37 | 0.28 | % | 51,478 | 39 | 0.30 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,526,426 | 1,672 | 0.44 | % | 1,517,521 | 1,645 | 0.43 | % | ||||||||||||||||
| Non-interest bearing deposits | 382,946 | - | - | 348,303 | - | - | ||||||||||||||||||
| Total including non-interest-bearing demand deposits | 1,909,372 | 1,672 | 0.35 | % | 1,865,824 | 1,645 | 0.35 | % | ||||||||||||||||
| Other non-interest-bearing liabilities | 28,992 | 23,172 | ||||||||||||||||||||||
| Total liabilities | 1,938,364 | 1,888,996 | ||||||||||||||||||||||
| Stockholders' equity | 274,239 | 276,490 | ||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,212,603 | $ | 2,165,486 | ||||||||||||||||||||
| Net interest income; interest rate spread | $ | 18,844 | 3.71 | % | $ | 17,576 | 3.53 | % | ||||||||||||||||
| Net interest margin (3) | 3.81 | % | 3.62 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 130 | % | 129 | % | ||||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||
| 2015 | 2014 | |||||||||||||||||||||||
| Average | Yield | Average | Yield | |||||||||||||||||||||
| Balance | Interest(1) | Rate | Balance | Interest(1) | Rate | |||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Loans receivable | $ | 1,660,404 | $ | 36,118 | 4.39 | % | $ | 1,548,351 | $ | 33,590 | 4.37 | % | ||||||||||||
| Securities | 243,281 | 4,264 | 3.65 | % | 210,061 | 3,947 | 3.88 | % | ||||||||||||||||
| Interest Bearing Deposits | 57,659 | 80 | 0.28 | % | 170,829 | 219 | 0.26 | % | ||||||||||||||||
| FHLB stock | 13,802 | 275 | 4.02 | % | 15,552 | 365 | 4.73 | % | ||||||||||||||||
| Total interest-earning assets | 1,975,146 | 40,737 | 4.18 | % | 1,944,793 | 38,121 | 3.95 | % | ||||||||||||||||
| Non-interest-earning assets | 221,135 | 211,134 | ||||||||||||||||||||||
| Total assets | $ | 2,196,281 | $ | 2,155,927 | ||||||||||||||||||||
| Deposits and Interest-bearing liabilities: | ||||||||||||||||||||||||
| Interest bearing deposits | $ | 1,396,114 | $ | 2,584 | 0.37 | % | $ | 1,403,873 | $ | 2,685 | 0.39 | % | ||||||||||||
| FHLB advances and other | 30,534 | 283 | 1.87 | % | 22,240 | 266 | 2.41 | % | ||||||||||||||||
| Subordinated debentures | 36,129 | 297 | 1.66 | % | 36,133 | 292 | 1.63 | % | ||||||||||||||||
| Notes payable | 53,312 | 75 | 0.28 | % | 52,033 | 80 | 0.31 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,516,089 | 3,239 | 0.43 | % | 1,514,279 | 3,323 | 0.44 | % | ||||||||||||||||
| Non-interest bearing deposits | 374,533 | - | - | 344,795 | - | - | ||||||||||||||||||
| Total including non-interest-bearing demand deposits | 1,890,622 | 3,239 | 0.35 | % | 1,859,074 | 3,323 | 0.36 | % | ||||||||||||||||
| Other non-interest-bearing liabilities | 28,581 | 21,735 | ||||||||||||||||||||||
| Total liabilities | 1,919,203 | 1,880,809 | ||||||||||||||||||||||
| Stockholders' equity | 277,078 | 275,118 | ||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,196,281 | $ | 2,155,927 | ||||||||||||||||||||
| Net interest income; interest rate spread | $ | 37,498 | 3.75 | % | $ | 34,798 | 3.51 | % | ||||||||||||||||
| Net interest margin (3) | 3.84 | % | 3.62 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 130 | % | 128 | % | ||||||||||||||||||||
| (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. |
| 10 |
Selected Quarterly Information
First Defiance Financial Corp.
| (dollars in thousands, except per share data) | 2nd Qtr 2015 | 1st Qtr 2015 | 4th Qtr 2014 | 3rd Qtr 2014 | 2nd Qtr 2014 | |||||||||||||||
| Summary of Operations | ||||||||||||||||||||
| Tax-equivalent interest income (1) | $ | 20,516 | $ | 20,221 | $ | 20,174 | $ | 19,751 | $ | 19,221 | ||||||||||
| Interest expense | 1,672 | 1,567 | 1,612 | 1,623 | 1,645 | |||||||||||||||
| Tax-equivalent net interest income (1) | 18,844 | 18,654 | 18,562 | 18,128 | 17,576 | |||||||||||||||
| Provision for loan losses | - | 120 | 162 | 406 | 446 | |||||||||||||||
| Tax-equivalent NII after provision for loan losses (1) | 18,844 | 18,534 | 18,400 | 17,722 | 17,130 | |||||||||||||||
| Investment securities gains, net of impairment | - | - | 1 | 460 | 471 | |||||||||||||||
| Non-interest income (excluding securities gains/losses) | 7,809 | 8,281 | 7,341 | 8,896 | 7,146 | |||||||||||||||
| Non-interest expense | 16,796 | 16,897 | 16,969 | 16,771 | 16,357 | |||||||||||||||
| Income taxes | 2,815 | 2,853 | 1,957 | 2,773 | 2,254 | |||||||||||||||
| Net income | 6,563 | 6,601 | 6,355 | 7,069 | 5,689 | |||||||||||||||
| Tax equivalent adjustment (1) | 479 | 464 | 461 | 465 | 447 | |||||||||||||||
| At Period End | ||||||||||||||||||||
| Total assets | $ | 2,196,510 | $ | 2,201,321 | $ | 2,178,952 | $ | 2,151,079 | $ | 2,151,490 | ||||||||||
| Earning assets | 1,998,580 | 1,999,601 | 1,975,757 | 1,954,496 | 1,949,729 | |||||||||||||||
| Loans | 1,705,716 | 1,684,518 | 1,646,786 | 1,636,266 | 1,581,984 | |||||||||||||||
| Allowance for loan losses | 25,384 | 25,302 | 24,766 | 24,567 | 24,627 | |||||||||||||||
| Deposits | 1,763,390 | 1,772,693 | 1,760,813 | 1,730,645 | 1,741,812 | |||||||||||||||
| Stockholders’ equity | 276,028 | 273,117 | 279,505 | 278,233 | 276,449 | |||||||||||||||
| Stockholders’ equity / assets | 12.57 | % | 12.41 | % | 12.83 | % | 12.93 | % | 12.85 | % | ||||||||||
| Goodwill | 61,525 | 61,525 | 61,525 | 61,525 | 61,525 | |||||||||||||||
| Average Balances | ||||||||||||||||||||
| Total assets | $ | 2,212,603 | $ | 2,179,576 | $ | 2,184,792 | $ | 2,153,226 | $ | 2,165,486 | ||||||||||
| Earning assets | 1,991,830 | 1,958,463 | 1,964,074 | 1,934,651 | 1,952,440 | |||||||||||||||
| Loans | 1,673,750 | 1,647,059 | 1,615,657 | 1,586,652 | 1,551,799 | |||||||||||||||
| Deposits and interest-bearing liabilities | 1,909,372 | 1,871,871 | 1,879,918 | 1,853,271 | 1,865,824 | |||||||||||||||
| Deposits | 1,780,912 | 1,760,383 | 1,764,908 | 1,738,494 | 1,756,098 | |||||||||||||||
| Stockholders’ equity | 274,239 | 279,917 | 278,944 | 276,968 | 276,490 | |||||||||||||||
| Stockholders’ equity / assets | 12.39 | % | 12.84 | % | 12.77 | % | 12.86 | % | 12.77 | % | ||||||||||
| Per Common Share Data | ||||||||||||||||||||
| Net Income: | ||||||||||||||||||||
| Basic | $ | 0.71 | $ | 0.71 | $ | 0.68 | $ | 0.75 | $ | 0.59 | ||||||||||
| Diluted | 0.70 | 0.69 | 0.65 | 0.71 | 0.57 | |||||||||||||||
| Dividends | 0.20 | 0.18 | 0.18 | 0.15 | 0.15 | |||||||||||||||
| Market Value: | ||||||||||||||||||||
| High | $ | 38.21 | $ | 34.64 | $ | 35.70 | $ | 29.00 | $ | 29.00 | ||||||||||
| Low | 32.42 | 29.05 | 26.95 | 26.99 | 26.50 | |||||||||||||||
| Close | 37.53 | 32.82 | 34.06 | 27.01 | 28.70 | |||||||||||||||
| Common Book Value | 29.76 | 29.53 | 30.17 | 29.60 | 28.96 | |||||||||||||||
| Shares outstanding, end of period (in thousands) | 9,275 | 9,248 | 9,235 | 9,371 | 9,515 | |||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||
| Tax-equivalent net interest margin (1) | 3.81 | % | 3.88 | % | 3.76 | % | 3.73 | % | 3.62 | % | ||||||||||
| Return on average assets | 1.19 | % | 1.23 | % | 1.15 | % | 1.30 | % | 1.05 | % | ||||||||||
| Return on average equity | 9.60 | % | 9.56 | % | 9.04 | % | 10.13 | % | 8.25 | % | ||||||||||
| Efficiency ratio (2) | 63.02 | % | 62.73 | % | 65.51 | % | 62.06 | % | 66.16 | % | ||||||||||
| Effective tax rate | 30.02 | % | 30.18 | % | 23.54 | % | 28.18 | % | 28.38 | % | ||||||||||
| Common dividend payout ratio (basic) | 28.17 | % | 24.65 | % | 25.74 | % | 20.00 | % | 25.42 | % | ||||||||||
| (1) | Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35% |
| (2) | Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains, net. |
| 11 |
Selected Quarterly Information
First Defiance Financial Corp.
| (dollars in thousands, except per share data) | 2nd Qtr 2015 | 1st Qtr 2015 | 4th Qtr 2014 | 3rd Qtr 2014 | 2nd Qtr 2014 | |||||||||||||||
| Loan Portfolio Composition | ||||||||||||||||||||
| One to four family residential real estate | $ | 205,044 | $ | 203,558 | $ | 206,437 | $ | 209,135 | $ | 199,886 | ||||||||||
| Construction | 140,114 | 125,144 | 112,385 | 116,809 | 108,478 | |||||||||||||||
| Commercial real estate | 885,125 | 876,476 | 840,488 | 834,443 | 801,923 | |||||||||||||||
| Commercial | 401,247 | 395,378 | 399,730 | 392,465 | 390,055 | |||||||||||||||
| Consumer finance | 14,911 | 14,967 | 15,466 | 16,616 | 15,800 | |||||||||||||||
| Home equity and improvement | 109,694 | 110,755 | 111,813 | 111,151 | 108,460 | |||||||||||||||
| Total loans | 1,756,135 | 1,726,278 | 1,686,319 | 1,680,619 | 1,624,602 | |||||||||||||||
| Less: | ||||||||||||||||||||
| Loans in process | 49,477 | 40,833 | 38,653 | 43,548 | 41,874 | |||||||||||||||
| Deferred loan origination fees | 942 | 927 | 880 | 805 | 744 | |||||||||||||||
| Allowance for loan loss | 25,384 | 25,302 | 24,766 | 24,567 | 24,627 | |||||||||||||||
| Net Loans | $ | 1,680,332 | $ | 1,659,216 | $ | 1,622,020 | $ | 1,611,699 | $ | 1,557,357 | ||||||||||
| Allowance for loan loss activity | ||||||||||||||||||||
| Beginning allowance | $ | 25,302 | $ | 24,766 | $ | 24,567 | $ | 24,627 | $ | 24,783 | ||||||||||
| Provision for loan losses | 0 | 120 | 162 | 406 | 446 | |||||||||||||||
| Credit loss charge-offs: | ||||||||||||||||||||
| One to four family residential real estate | 11 | 78 | 61 | 95 | 42 | |||||||||||||||
| Commercial real estate | 146 | 155 | 505 | 246 | 39 | |||||||||||||||
| Commercial | 23 | 2 | 212 | 1,272 | 973 | |||||||||||||||
| Consumer finance | 13 | 3 | 1 | 16 | 12 | |||||||||||||||
| Home equity and improvement | 187 | 43 | 87 | 42 | 80 | |||||||||||||||
| Total charge-offs | 380 | 281 | 866 | 1,671 | 1,146 | |||||||||||||||
| Total recoveries | 462 | 697 | 903 | 1,205 | 544 | |||||||||||||||
| Net charge-offs (recoveries) | (82 | ) | (416 | ) | (37 | ) | 466 | 602 | ||||||||||||
| Ending allowance | $ | 25,384 | $ | 25,302 | $ | 24,766 | $ | 24,567 | $ | 24,627 | ||||||||||
| Credit Quality | ||||||||||||||||||||
| Total non-performing loans (1) | $ | 16,737 | $ | 18,703 | $ | 24,130 | $ | 22,525 | $ | 24,863 | ||||||||||
| Real estate owned (REO) | 5,371 | 6,392 | 6,181 | 5,326 | 5,554 | |||||||||||||||
| Total non-performing assets (2) | $ | 22,108 | $ | 25,095 | $ | 30,311 | $ | 27,851 | $ | 30,417 | ||||||||||
| Net charge-offs (recoveries) | (82 | ) | (416 | ) | (37 | ) | 466 | 602 | ||||||||||||
| Restructured loans, accruing (3) | 22,234 | 19,616 | 24,686 | 26,579 | 26,975 | |||||||||||||||
| Allowance for loan losses / loans | 1.49 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.56 | % | ||||||||||
| Allowance for loan losses / non-performing assets | 114.82 | % | 100.82 | % | 81.71 | % | 88.21 | % | 80.96 | % | ||||||||||
| Allowance for loan losses / non-performing loans | 151.66 | % | 135.28 | % | 102.64 | % | 109.07 | % | 99.05 | % | ||||||||||
| Non-performing assets / loans plus REO | 1.29 | % | 1.48 | % | 1.83 | % | 1.70 | % | 1.92 | % | ||||||||||
| Non-performing assets / total assets | 1.01 | % | 1.14 | % | 1.39 | % | 1.29 | % | 1.41 | % | ||||||||||
| Net charge-offs / average loans (annualized) | -0.02 | % | -0.10 | % | -0.01 | % | 0.12 | % | 0.16 | % | ||||||||||
| Deposit Balances | ||||||||||||||||||||
| Non-interest-bearing demand deposits | $ | 378,970 | $ | 370,997 | $ | 379,552 | $ | 340,575 | $ | 355,268 | ||||||||||
| Interest-bearing demand deposits and money market | 722,813 | 737,533 | 727,729 | 739,292 | 717,506 | |||||||||||||||
| Savings deposits | 218,055 | 215,590 | 203,673 | 197,464 | 200,626 | |||||||||||||||
| Retail time deposits less than $100,000 | 284,471 | 286,890 | 286,904 | 289,326 | 299,288 | |||||||||||||||
| Retail time deposits greater than $100,000 | 159,081 | 161,683 | 162,955 | 163,988 | 169,124 | |||||||||||||||
| Total deposits | $ | 1,763,390 | $ | 1,772,693 | $ | 1,760,813 | $ | 1,730,645 | $ | 1,741,812 | ||||||||||
| (1) | Non-performing loans consist of non-accrual loans. |
| (2) | Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof. |
| (3) | Accruing restructured loans are loans with known credit problems that are not contractually past due and therefore are not included in non-performing loans. |
| 12 |
Loan Delinquency Information
First Defiance Financial Corp.
| (dollars in thousands) | Total Balance | Current | 30 to 89 days past due | Non Accrual Loans | ||||||||||||
| June 30, 2015 | ||||||||||||||||
| One to four family residential real estate | $ | 205,044 | $ | 201,629 | $ | 473 | $ | 2,942 | ||||||||
| Construction | 140,114 | 140,114 | - | - | ||||||||||||
| Commercial real estate | 885,125 | 872,654 | 2,685 | 9,786 | ||||||||||||
| Commercial | 401,247 | 397,653 | 148 | 3,446 | ||||||||||||
| Consumer finance | 14,911 | 14,885 | 16 | 10 | ||||||||||||
| Home equity and improvement | 109,694 | 108,238 | 903 | 553 | ||||||||||||
| Total loans | $ | 1,756,135 | $ | 1,735,173 | $ | 4,225 | $ | 16,737 | ||||||||
| December 31, 2014 | ||||||||||||||||
| One to four family residential real estate | $ | 206,437 | $ | 201,931 | $ | 1,174 | $ | 3,332 | ||||||||
| Construction | 112,385 | 112,385 | - | - | ||||||||||||
| Commercial real estate | 840,488 | 824,770 | 544 | 15,174 | ||||||||||||
| Commercial | 399,730 | 394,671 | 66 | 4,993 | ||||||||||||
| Consumer finance | 15,466 | 15,330 | 124 | 12 | ||||||||||||
| Home equity and improvement | 111,813 | 109,993 | 1,201 | 619 | ||||||||||||
| Total loans | $ | 1,686,319 | $ | 1,659,080 | $ | 3,109 | $ | 24,130 | ||||||||
| June 30, 2014 | ||||||||||||||||
| One to four family residential real estate | $ | 199,886 | $ | 196,253 | $ | 732 | $ | 2,901 | ||||||||
| Construction | 108,478 | 108,478 | - | - | ||||||||||||
| Commercial real estate | 801,923 | 786,911 | 205 | 14,807 | ||||||||||||
| Commercial | 390,055 | 382,907 | 96 | 7,052 | ||||||||||||
| Consumer finance | 15,800 | 15,711 | 89 | - | ||||||||||||
| Home equity and improvement | 108,460 | 107,271 | 1,086 | 103 | ||||||||||||
| Total loans | $ | 1,624,602 | $ | 1,597,531 | $ | 2,208 | $ | 24,863 | ||||||||
| 13 |