EX-99.1 2 v415797_ex99-1.htm EXHIBIT 99.1

 

 

 

 

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.

 

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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.

 

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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 

 

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