10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2015

OR

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

For the Transition Period from ___________to__________

Commission file number 0-26850

First Defiance Financial Corp.

(Exact name of registrant as specified in its charter)

Ohio	34-1803915
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

601 Clinton Street, Defiance, Ohio	43512
(Address of principal executive office)	(Zip Code)

Registrant's telephone number, including area code: (419) 782-5015

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.01 Par Value – 9,172,657 shares outstanding at October 30, 2015.

FIRST DEFIANCE FINANCIAL CORP.

INDEX

		Page Number
PART I.-FINANCIAL INFORMATION
Item 1.	Consolidated Condensed Financial Statements (Unaudited):
	Consolidated Condensed Statements of Financial Condition – September 30, 2015 and December 31, 2014	2
	Consolidated Condensed Statements of Income - Three and nine months ended September 30, 2015 and 2014	4
	Consolidated Condensed Statements of Comprehensive Income – Three and nine months ended September 30, 2015 and 2014	5
	Consolidated Condensed Statements of Changes in   Stockholders’ Equity – Nine months ended September 30, 2015 and 2014	6
	Consolidated Condensed Statements of Cash Flows  - Nine months ended September 30, 2015 and 2014	7
	Notes to Consolidated Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	49
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	73
Item 4.	Controls and Procedures	74
PART II-OTHER INFORMATION:
Item 1.	Legal Proceedings	76
Item 1A.	Risk Factors	76
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	77
Item 6.	Exhibits	77
	Signatures	78

1

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

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

	September 30, 2015		December 31, 2014
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	34,308	$	41,936
Federal funds sold		39,000		71,000
		73,308		112,936
Securities:
Available-for-sale, carried at fair value		236,926		239,321
Held-to-maturity, carried at amortized cost (fair value $253 and $308 at September 30, 2015 and December 31, 2014, respectively)		251		313
		237,177		239,634
Loans held for sale		6,701		4,535
Loans receivable, net of allowance of $25,209 at September 30, 2015 and $24,766 at December 31, 2014, respectively		1,708,329		1,622,020
Accrued interest receivable		7,142		6,037
Federal Home Loan Bank stock		13,802		13,802
Bank owned life insurance		51,671		47,013
Premises and equipment		38,993		40,496
Real estate and other assets held for sale		4,936		6,181
Goodwill		61,798		61,525
Core deposit and other intangibles		2,034		2,395
Mortgage servicing rights		9,194		9,012
Other assets		13,196		13,366
Total assets	$	2,228,281	$	2,178,952

(continued)

2

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

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

	September 30, 2015			December 31, 2014
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	1,793,053		$	1,760,813
Advances from the Federal Home Loan Bank		40,801			21,544
Subordinated debentures		36,083			36,083
Securities sold under repurchase agreements		53,838			54,759
Advance payments by borrowers		1,864			2,309
Deferred taxes		978			1,176
Other liabilities		23,108			22,763
Total liabilities		1,949,725			1,899,447
Stockholders’ equity:
Preferred stock, $.01 par value per share:
5,000,000 shares authorized; no shares issued		–			–
Common stock, $.01 par value per share:
25,000,000 shares authorized; 12,722,469 and 12,735,313  shares issued and 9,171,948 and 9,234,534 shares outstanding, respectively		127			127
Common stock warrant		-			878
Additional paid-in capital		125,615			136,266
Accumulated other comprehensive income, net of tax of $2,106 and $2,214, respectively		3,909			4,114
Retained earnings		215,007			200,600
Treasury stock, at cost, 3,550,521 and 3,500,779 shares respectively		(66,102	)		(62,480	)
Total stockholders’ equity		278,556			279,505
Total liabilities and stockholders’ equity	$	2,228,281		$	2,178,952

See accompanying notes

3

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Income

(UNAUDITED)

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

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2015			2014		2015		2014
Interest Income
Loans	$	18,419		$	17,365	$	54,445	$	50,894
Investment securities:
Taxable		880			933		2,712		2,560
Non-taxable		796			787		2,377		2,295
Interest-bearing deposits		33			64		113		283
FHLB stock dividends		138			137		413		502
Total interest income		20,266			19,286		60,060		56,534
Interest Expense
Deposits		1,363			1,304		3,947		3,989
FHLB advances and other		178			131		461		397
Subordinated debentures		154			147		451		439
Notes payable		38			41		113		121
Total interest expense		1,733			1,623		4,972		4,946
Net interest income		18,533			17,663		55,088		51,588
Provision for loan losses		(27	)		406		93		955
Net interest income after provision for loan losses		18,560			17,257		54,995		50,633
Non-interest Income
Service fees and other charges		2,799			2,660		8,018		7,492
Insurance commissions		2,310			2,366		7,793		7,640
Mortgage banking income		1,680			1,545		5,248		4,332
Gain on sale of non-mortgage loans		543			40		776		79
Gain on sale or call of securities		-			460		-		931
Trust income		370			315		1,095		895
Income from Bank Owned Life Insurance		238			1,130		658		1,584
Other non-interest income		42			840		485		1,346
Total non-interest income		7,982			9,356		24,073		24,299
Non-interest Expense
Compensation and benefits		9,791			9,287		27,896		26,468
Occupancy		1,788			1,613		5,361		4,905
FDIC insurance premium		329			350		999		1,088
Financial institutions tax		447			515		1,340		1,524
Data processing		1,531			1,489		4,652		4,333
Amortization of intangibles		157			269		536		832
Other non-interest expense		2,805			3,248		9,758		10,639
Total non-interest expense		16,848			16,771		50,542		49,789
Income before income taxes		9,694			9,842		28,526		25,143
Federal income taxes		2,998			2,773		8,666		7,206
Net Income	$	6,696		$	7,069	$	19,860	$	17,937
Earnings per common share (Note 6)
Basic	$	0.72		$	0.75	$	2.15	$	1.87
Diluted	$	0.72		$	0.71	$	2.11	$	1.79
Dividends declared per share (Note 5)	$	0.20		$	0.15	$	0.575	$	0.45
Average common shares outstanding (Note 6)
Basic		9,238			9,445		9,247		9,577
Diluted		9,322			9,903		9,430		10,031

See accompanying notes

4

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Comprehensive Income

(UNAUDITED)

(Amounts in Thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Net Income	$	6,696		$	7,069		$	19,860		$	17,937
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale		2,024			707			(313	)		5,172
Reclassification adjustment for security gains (losses)
included in net income(1)		-			(460	)		-			(931	)
Income tax benefit (expense)		(709	)		(87	)		108			(1,485	)
Other comprehensive income (loss)		1,315			160			(205	)		2,756
Comprehensive income	$	8,011		$	7,229		$	19,655		$	20,693

(1) Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended September 30, 2015 and 2014 was $0 and $138, respectively. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the nine months ended September 30, 2015 and 2014 was $0 and $279, respectively.

5

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Statement of Changes in Stockholders’ Equity

(UNAUDITED)

(Amounts in Thousands, except share data)

											Accumulated
					Common			Additional			Other									Total
	Preferred		Common		Stock			Paid-In			Comprehensive			Retained			Treasury			Stockholders’
	Stock		Stock		Warrant			Capital			Income			Earnings			Stock			Equity
Balance at January 1, 2015	$	-	$	127	$	878		$	136,266		$	4,114		$	200,600		$	(62,480	)	$	279,505
Net income															19,860						19,860
Other comprehensive loss												(205	)								(205	)
Stock option expense									103												103
Warrant repurchase						(878	)		(11,101	)											(11,979	)
67,460 shares issued under stock option plan, with $151 income tax benefit, net of 14,340 repurchased and/or retired									443						(313	)		1,429			1,559
Restricted share activity, including 15,506 shares issued									(121	)					185			270			334
1,487 shares issued from direct purchases									25									27			52
147,039 shares repurchased																		(5,348	)		(5,348	)
Common stock dividends declared															(5,325	)					(5,325	)
Balance at September 30, 2015	$	-	$	127	$	-		$	125,615		$	3,909		$	215,007		$	(66,102	)	$	278,556
Balance at January 1, 2014	$	-	$	127	$	878		$	136,403		$	545		$	182,290		$	(48,096	)	$	272,147
Net income															17,937						17,937
Other comprehensive income												2,756									2,756
Stock option expense									60												60
35,450 shares issued under stock option plan with $67 income tax benefit, net of repurchases									15						(46	)		569			538
Restricted share activity under Stock Incentive Plans including 13,087 shares issued									(313	)								212			(101	)
2,678 shares issued from direct purchases									29									44			73
399,288 shares repurchased																		(10,873	)		(10,873	)
Common stock dividends declared															(4,304	)					(4,304	)
Balance at September 30, 2014	$	-	$	127	$	878		$	136,194		$	3,301		$	195,877		$	(58,144	)	$	278,233

6

FIRST DEFIANCE FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(UNAUDITED)

(Amounts in Thousands)

	Nine Months Ended
	September 30,
	2015			2014
Operating Activities
Net income	$	19,860		$	17,937
Items not requiring (providing) cash
Provision for loan losses		93			955
Depreciation		2,439			2,189
Amortization of mortgage servicing rights, net of impairment recoveries		1,073			921
Amortization of core deposit and other intangible assets		536			832
Net amortization of premiums and discounts on loans and deposits		333			422
Amortization of premiums and discounts on securities		551			300
Loss on write-downs of property, plant and equipment		428			-
Change in deferred taxes		(90	)		(43	)
Proceeds from the sale of loans held for sale		167,687			115,877
Originations of loans held for sale		(167,380	)		(111,940	)
Gain from sale of loans		(4,504	)		(2,680	)
Gain from sale or call of securities		-			(931	)
(Gain)/Loss on sale or write-down of real estate and other assets held for sale		281			(167	)
Stock option expense		103			60
Restricted stock expense (benefit)		334			(101	)
Income from bank owned life insurance		(658	)		(1,584	)
Changes in:
Accrued interest receivable		(1,105	)		(1,125	)
Other assets		170			(4,579	)
Other liabilities		194			3,888
Net cash provided by (used in) operating activities		20,345			20,231
Investing Activities
Proceeds from maturities of held-to-maturity securities		62			63
Proceeds from maturities, calls and pay-downs of available-for-sale securities		22,215			15,293
Proceeds from sale of real estate and other assets held for sale		2,103			2,071
Proceeds from the sale of available-for-sale securities		-			14,520
Proceeds from sale of non-mortgage loans		16,178			15,556
Purchases of available-for-sale securities		(20,684	)		(64,678	)
Proceeds from Federal Home Loan Bank stock redemption		-			5,548
Purchase of bank-owned life insurance		(4,000	)		(4,000	)
Net cash paid in Insurance acquisition		(297	)		-
Proceeds from cash surrender value of bank-owned life insurance		-			594
Proceeds from bank-owned life insurance death benefit		-			910
Purchases of portfolio mortgage loans		-			(16,594	)
Purchases of premises and equipment, net		(1,631	)		(3,580	)
Net increase in loans receivable		(103,009	)		(56,654	)
Net cash used in investing activities		(89,063	)		(90,951	)
Financing Activities
Net increase (decrease) in deposits and advance payments by borrowers		31,795			(4,818	)
Repayment of Federal Home Loan Bank advances		(7,743	)		(730	)
Increase in Federal Home Loan Bank advances		27,000			-
Increase (decrease) in securities sold under repurchase agreements		(921	)		8,170
Repayment of warrants		(11,979	)		-
Proceeds from exercise of stock options		1,559			538
Proceeds from treasury stock sales		52			73
Cash dividends paid on common stock		(5,325	)		(4,304	)
Net cash paid for repurchase of common stock		(5,348	)		(10,873	)
Net cash provided by (used in) financing activities		29,090			(11,944	)
Increase (decrease) in cash and cash equivalents		(39,628	)		(82,664	)
Cash and cash equivalents at beginning of period		112,936		$	179,318
Cash and cash equivalents at end of period	$	73,308		$	96,654
Supplemental cash flow information:
Interest paid	$	4,939		$	4,920
Income taxes paid	$	7,300		$	6,050
Transfers from loans to real estate and other assets held for sale	$	872		$	1,371
Transfers from property and equipment to real estate and other  assets held for sale	$	267		$	-
Transfers from loans held-for-sale to loans	$	-		$	1,178

See accompanying notes.

7

FIRST DEFIANCE FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements (UNAUDITED)

September 30, 2015 and 2014

1. Basis of Presentation

First Defiance Financial Corp. (“First Defiance” or the “Company”) is a unitary thrift holding company that conducts business through its three wholly owned subsidiaries, First Federal Bank of the Midwest (“First Federal”), First Insurance Group of the Midwest, Inc. (“First Insurance”), and First Defiance Risk Management Inc. (“First Defiance Risk Management”). All significant intercompany transactions and balances are eliminated in consolidation.

First Federal is primarily engaged in attracting deposits from the general public through its offices and using those and other available sources of funds to originate loans primarily in the counties in which its offices are located. First Federal’s traditional banking activities include originating and servicing residential, non-residential real estate, commercial, home improvement and home equity and consumer loans and providing a broad range of depository, trust and wealth management services. First Insurance is an insurance agency that does business in the Defiance, Bryan, Bowling Green, Maumee, Oregon and Lima, Ohio areas, offering property and casualty, group health and life insurance products.On September 1, 2015, First Insurance acquired a group medical benefits business from Buckeye Insurance Consultants, Inc. located in Lima, Ohio for a cash purchase price of $495,000 of which $198,000 is set aside for contingent payments to be paid in cash in 2016, 2017 and 2018 if certain conditions regarding future revenue are met. As of September 30, 2015, management had determined there was goodwill of $273,000 and identifiable intangible assets of $175,000 consisting of a customer relationship intangible of $64,000 and a non-compete intangible of $111,000 related to the acquisition. Disclosure of pro forma results of this acquisition are not material to the Company’s consolidated financial statements. First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company to insure the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

The consolidated condensed statement of financial condition at December 31, 2014 has been derived from the audited financial statements at that date, which were included in First Defiance’s Annual Report on Form 10-K.

The accompanying consolidated condensed financial statements as of September 30, 2015 and for the three and nine month periods ended September 30, 2015 and 2014 have been prepared by First Defiance without audit and do not include information or footnotes necessary for the complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. These consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in First Defiance's 2014 Annual Report on Form 10-K for the year ended December 31, 2014. However, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for the fair presentation of the financial statements have been made. The results for the three and nine month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the entire year.

8

2. Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Allowance for Loan Losses

Beginning June 30, 2015, the Company refined the methodology to its allowance for loan loss calculation pertaining to the general reserve component for non-impaired loans. There was no change to the calculation of the component for reserves on impaired loans. Within the general reserve, the determination of the historical loss component was modified from using a three-year average annual loss rate to a loss migration measurement. The loss migration measurement implemented June 30, 2015, utilizes an average of four (4) four-year loss migration periods for each loan portfolio segment with differentiation between loan risk grades. This approach provides for a more precise reflection of probable incurred losses by risk grade within each loan portfolio segment over an average loan life cycle. Management believes that capturing the risk grade changes and cumulative losses over the life cycle of a loan more accurately depicts management’s estimate of historical losses as well as being more reflective of the ongoing risks in the loan portfolio, thereby requiring less weight to the subjective components of the allowance for loan losses. Prior to June 30, 2015, the approach to this component quantified the historical loss by calculating a rolling twelve quarter average annual loss rate for each portfolio segment, without differentiation between loan risk grades. This modification resulted in a change of the general reserves between the loan portfolio segments but did not have a material impact on the overall allowance for loan losses.

Earnings Per Common Share

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

Newly Issued Accounting Standards

Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 was originally going to be effective for the Company on January 1, 2017; however, the FASB recently issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date" which deferred the effective date of ASU 2014-09 by one year to January 1, 2018. The Company is currently evaluating the potential impact of ASU 2014-09 on its Consolidated Financial Statements.

9

In June 2014, the FASB issued ASU No. 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The amendments in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The amendments in the ASU also require expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The Company adopted the amendments in this ASU effective January 1, 2015. In addition, the expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings were effective for the Company’s reporting period ending June 30, 2015. All of the Company's repurchase agreements are typical in nature (i.e., not repurchase-to-maturity transactions or repurchase agreements executed as a repurchase financing) and are accounted for as secured borrowings. As such, the adoption of ASU No. 2014-11 did not have a material impact on the Company's Consolidated Financial Statements.

In January 2014, the FASB issued ASU No. 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." ASU 2014-01 applies to all reporting entities that invest in qualified affordable housing projects through limited liability entities. The pronouncement permits reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. The pronouncement also requires disclosure that enables users of its financial statements to understand the nature of these investments. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The pronouncement should be applied retrospectively for all periods presented, effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption was permitted. The Company early adopted ASU 2014-01 in January 2014 and such adoption did not have a material impact on the Company’s Consolidated Financial Statements.

10

In January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of the amendments in ASU 2014-04 to Topic 310, “Receivables - Troubled Debt Restructurings by Creditors,” is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. An entity can elect to adopt the amendments using either a modified retrospective transition method or a prospective transition method. Early adoption was permitted. The Company adopted ASU 2014-04 on January 1, 2015 and such adoption did not have a material impact on the Company’s Consolidated Financial Statements.

3. Fair Value

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

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

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

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

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

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

Available for sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 1 include federal agency preferred stock securities and one corporate bond. Securities in Level 2 include U.S. Government agencies, mortgage-backed securities, corporate bonds and municipal securities.

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

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

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal.  Appraisal values are generally discounted from 0% to 30% to account for other factors that may impact the value of collateral. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include:  discounts for collection issues and/or changes in market conditions.

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

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

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

Assets and Liabilities Measured on a Recurring Basis

September 30, 2015	Level 1 Inputs		Level 2  Inputs		Level 3  Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	3,003	$	-	$	3,003
Mortgage-backed - residential		-		62,051		-		62,051
REMICs		-		1,682		-		1,682
Collateralized mortgage obligations		-		73,790		-		73,790
Preferred stock		1		-		-		1
Corporate bonds		1,989		3,993		-		5,982
Obligations of state and political subdivisions		-		90,417		-		90,417
Mortgage banking derivative - asset		-		738		-		738
Mortgage banking derivative - liability		-		100		-		100

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December 31, 2014	Level 1 Inputs		Level 2  Inputs		Level 3  Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	-	$	980	$	-	$	980
Mortgage-backed - residential		-		59,856		-		59,856
REMICs		-		1,839		-		1,839
Collateralized mortgage obligations		-		81,121		-		81,121
Preferred stock		1		-		-		1
Corporate bonds		1,989		5,003		-		6,992
Obligations of state and political subdivisions		-		88,532		-		88,532
Mortgage banking derivative - asset		-		351		-		351
Mortgage banking derivative - liability		-		24		-		24

There were no assets measured at fair value on a recurring basis using Level 3 inputs for the nine months ended September 30, 2015.

The table below presents a reconciliation and income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2014:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2014	$	582
Total gains or (losses) (realized/unrealized)
Included in earnings (realized)		(329	)
Included in other comprehensive income (presented gross of taxes)		993
Amortization		-
Sales		(1,246	)
Transfers in and/or out of Level 3		-
Ending balance, September 30, 2014	$	-

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, July 1, 2014	$	-
Total gains or (losses) (realized/unrealized)
Included in earnings (realized)		-
Included in other comprehensive income (presented gross of taxes)		-
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, September 30, 2014	$	-

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

Assets and Liabilities Measured on a Non-Recurring Basis

September 30, 2015	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	278	$	278
Multi Family Residential		-		-		102		102
Commercial Real Estate		-		-		4,726		4,726
Commercial loans		-		-		-		-
Home Equity and Improvement		-		-		94		94
Total Impaired loans		-		-		5,200		5,200
Mortgage servicing rights		-		874		-		874
Real estate held for sale
Residential		-		-		66		66
CRE		-		-		285		285
Total real estate held for sale		-		-		351		351

December 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	419	$	419
Multi Family Residential		-		-		269		269
Commercial Real Estate		-		-		6,665		6,665
Commercial		-		-		340		340
Home Equity and Improvement		-		-		98		98
Total impaired loans		-		-		7,791		7,791
Mortgage servicing rights		-		1,034		-		1,034
Real estate held for sale
Residential		-		-		-		-
CRE		-		-		739		739
Total real estate held for sale		-		-		739		739

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2015, the significant unobservable inputs used in the fair value measurements were as follows:

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	Fair  Value		Valuation Technique	Unobservable Inputs	Range of  Inputs	Weighted Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	5,200	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	10-30%		11	%
Real estate held for sale – Applies to all classes	$	351	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions	20-30%		28	%

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

	Fair  Value		Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted Average
			(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	7,791	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	10-30%		11	%
Real estate held for sale – Applies to all classes	$	739	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions	20-40%		28	%

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a fair value of $5.2 million, with a $13,000 valuation allowance and a fair value of $7.8 million, with a $19,000 valuation allowance at September 30, 2015 and December 31, 2014, respectively. A provision expense of $59,000 and a provision recovery of $659,000 for the three months and nine months ended September 30, 2015 and a provision expense of $1.4 million and $2.9 million for the three and nine months ended September 30, 2014 was included in earnings.

Mortgage servicing rights which are carried at the lower of cost or fair value had a fair value of $874,000 with a valuation allowance of $720,000 and a fair value of $1.0 million with a valuation allowance of $911,000 at September 30, 2015 and December 31, 2014, respectively. A recovery of $24,000 and $191,000 for the three and nine months ended September 30, 2015 and a recovery of $68,000 and $105,000 for the three and nine months ended September 30, 2014, respectively, were included in earnings.

Real estate held for sale is determined using Level 3 inputs which include appraisals and are adjusted for estimated costs to sell. The change in fair value of real estate held for sale and fixed assets transferred to real estate held for sale was $19,000 and $724,000 for the three and nine months ended September 30, 2015, which was recorded directly as an adjustment to current earnings through non-interest expense. The change in fair value of real estate held for sale was $53,000 and $126,000 for the three and nine months ended September 30, 2014.

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In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of September 30, 2015 and December 31, 2014. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of First Defiance.

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

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

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

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

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

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

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

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FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at September 30, 2015.

			Fair Value Measurements at September 30, 2015 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	73,308	$	73,308	$	73,308	$	-	$	-
Investment securities		237,177		237,179		1,990		235,189		-
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,715,030		1,730,554		-		7,245		1,723,309
Accrued interest receivable		7,142		7,142		-		1,368		5,774
Financial Liabilities:
Deposits	$	1,793,053	$	1,796,922	$	392,103	$	1,404,819	$	-
Advances from Federal Home Loan Bank		40,801		41,155		-		41,155		-
Securities sold under repurchase agreements		53,838		53,838		-		53,838		-
Subordinated debentures		36,083		35,307		-		-		35,307

			Fair Value Measurements at December 31, 2014 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	112,936	$	112,936	$	112,936	$	-	$	-
Investment securities		239,634		239,629		1,990		237,639		-
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,626,555		1,632,507		-		4,741		1,627,766
Accrued interest receivable		6,037		6,037		3		846		5,188
Financial Liabilities:
Deposits	$	1,760,813	$	1,762,733	$	379,552	$	1,383,181	$	-
Advances from Federal Home Loan Bank		21,544		21,772		-		21,772		-
Securities sold under repurchase agreements		54,759		54,759		-		54,759		-
Subordinated debentures		36,083		35,307		-		-		35,307

4. Stock Compensation Plans

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

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As of September 30, 2015, 93,070 options are outstanding at option prices based on the market value of the underlying shares on the date the options were granted. Options granted under all plans vest 20% per year except for the 2009 grant to the Company’s executive officers, which vested 40% in 2011 and then 20% annually. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.

In 2014, the Company approved a 2014 Short-Term (“STIP”) Equity Incentive Plan and a 2014 Long-Term (“LTIP”) Equity Incentive Plan for selected members of management.

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

Under the 2014 LTIP, the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 30,538 RSU’s to the participants in the 2014 LTIP effective January 1, 2014, which represents the maximum target award. The amount of benefit under the 2014 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2016. The awards will vest at the end of the performance period ending December 31, 2016. The benefits earned under the 2014 LTIP will be paid out in equity in the first quarter of 2017. The participants are required to be employed on the day of payout in order to receive such payment.

In 2015, the Company approved a 2015 STIP and a 2015 LTIP for selected members of management.

Under the 2015 STIP, the participants may earn up to 30% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The final amount of benefits under the 2015 STIP will be determined as of December 31, 2015 and will be paid out in cash in the first quarter of 2016. The participants are required to be employed on the day of payout in order to receive such payment.

Under the 2015 LTIP, the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 24,757 RSU’s to the participants in the 2015 LTIP effective January 1, 2015, which represents the maximum target award. The amount of benefit under the 2015 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2017. The awards will vest at the end of the performance period ending December 31, 2017. The benefits earned under the 2015 LTIP will be paid out in equity in the first quarter of 2018. The participants are required to be employed on the day of payout in order to receive such payment.

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In the nine months ended September 30, 2015, the Company granted 2,660 restricted shares. 2,160 shares were issued to directors and have a one-year vesting period. 500 shares were issued to an employee with a 3 year vesting period.

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

The fair value of stock options granted during the nine months ended September 30, 2015 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Nine Months ended
	September 30, 2015			September 30, 2014
Expected average risk-free rate		2.04	%		1.51	%
Expected average life		10.00 years			7.44 years
Expected volatility		42.00	%		44.62	%
Expected dividend yield		2.10	%		2.22	%

The weighted-average fair value of options granted was $13.13 for the nine months ended September 30, 2015 and $10.79 for the nine months ended September 30, 2014.

Following is activity under the plans during the nine months ended September 30, 2015:

Stock options	Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value  (in 000’s)
Options outstanding, January 1, 2015		173,720		$	20.80
Forfeited or cancelled		(5,100	)		25.36
Exercised		(81,800	)		22.00
Granted		6,250			32.94
Options outstanding, September 30, 2015		93,070		$	20.32		3.54	$	1,512
Vested or expected to vest at September 30, 2015		93,070		$	20.32		3.54	$	1,512
Exercisable at September 30, 2015		78,420		$	18.60		2.56	$	1,409

As of September 30, 2015, there was $147,000 of total unrecognized compensation costs related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 3.81 years.

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At September 30, 2015, 74,545 RSU’s and 8,427 stock grants were outstanding. Compensation expense is recognized over the performance period based on the achievements of targets as established with the plan documents. A total expense of $730,000 was recorded during the nine months ended September 30, 2015 compared to an expense of $389,000 for the same period in 2014. The lower expense in the first nine months of 2014 was due to accrual reversals primarily from the 2013 LTIP adjusting for the actual payout in year one and two as well as adjusting the estimated payout in year three. There was approximately $318,000 included within other liabilities at September 30, 2015 related to the STIP.

	Restricted Stock Units					Stock Grants
				Weighted-Average					Weighted-Average
				Grant Date					Grant Date
Unvested Shares	Shares			Fair Value		Shares			Fair Value
Unvested at January 1, 2015		91,812		$	21.00		5,767		$	25.97
Granted		24,757			32.30		15,506			19.91
Vested		(12,846	)		17.20		(12,846	)		17.20
Forfeited		(29,178	)		19.48		-			-
Unvested at September 30, 2015		74,545		$	25.86		8,427		$	28.19

The maximum amount of compensation expense that may be recorded for the 2015 STIP and the 2013, 2014 and 2015 LTIPs at September 30, 2015 is approximately $2.7 million. However, the estimated expense expected to be recorded as of September 30, 2015 based on the performance measures in the plan, is $1.7 million of which $740,000 is unrecognized at September 30, 2015 and will be recognized over the remaining performance periods.

5. Dividends on Common Stock

First Defiance declared and paid a $0.175 common stock dividend in the first quarter and a $0.20 per common stock dividend in the second and third quarters of 2015. First Defiance declared and paid a $0.15 per common stock dividend in the first, second and third quarters of 2014.

6. Earnings Per Common Share

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

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Numerator for basic and diluted earnings per common share – Net income	$	6,696	$	7,069	$	19,860	$	17,937
Denominator:
Denominator for basic earnings per common share – weighted average common shares, including participating securities		9,238		9,445		9,247		9,577
Effect of warrants		-		350		99		347
Effect of employee stock options and restricted share activity		84		108		84		107
Denominator for diluted earnings per common share		9,322		9,903		9,430		10,031
Basic earnings per common share	$	0.72	$	0.75	$	2.15	$	1.87
Diluted earnings per common share	$	0.72	$	0.71	$	2.11	$	1.79

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There were 6,250 and 16,750 shares under option granted to employees excluded from the diluted earnings per common share calculation as they were anti-dilutive for the three and nine months ended September 30, 2015, respectively. There were 10,500 and 43,000 shares under options granted to employees excluded from the diluted earnings per common share calculation as they were anti-dilutive for the three and nine months ended September 30, 2014, respectively.

7. Investment Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
At September 30, 2015
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	3,000	$	3	$	-		$	3,003
Mortgage-backed securities – residential		60,713		1,338		-			62,051
REMICs		1,638		44		-			1,682
Collateralized mortgage obligations		72,391		1,561		(162	)		73,790
Trust preferred securities and preferred stock		-		1		-			1
Corporate bonds		5,947		51		(16	)		5,982
Obligations of state and political subdivisions		86,326		4,134		(43	)		90,417
Totals	$	230,015	$	7,132	$	(221	)	$	236,926

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	15	$	-	$	-		$	15
FNMA certificates		79		2		(1	)		80
GNMA certificates		33		1		-			34
Obligations of state and political subdivisions		124		-		-			124
Totals	$	251	$	3	$	(1	)	$	253

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
At December 31, 2014
Available-for-sale
Obligations of U.S. government corporations and agencies	$	1,000	$	-	$	(20	)	$	980
Mortgage-backed securities - residential		58,380		1,476		-			59,856
REMICs		1,820		19		-			1,839
Collateralized mortgage obligations		80,252		1,280		(411	)		81,121
Trust preferred stock and preferred stock		-		1		-			1
Corporate bonds		6,913		85		(6	)		6,992
Obligations of state and political subdivisions		83,732		4,827		(27	)		88,532
Total Available-for-Sale	$	232,097	$	7,688	$	(464	)	$	239,321

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	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(In Thousands)
Held-to-Maturity*:
FHLMC certificates	$	26	$	-	$	(8	)	$	18
FNMA certificates		93		2		-			95
GNMA certificates		39		1		-			40
Obligations of states and political subdivisions		155		-		-			155
Total Held-to-Maturity	$	313	$	3	$	(8	)	$	308

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

The amortized cost and fair value of the investment securities portfolio at September 30, 2015 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”) and REMICs, which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,250	$	1,254	$	-	$	-
Due after one year through five years		15,188		15,501		124		124
Due after five years through ten years		35,329		37,188		-		-
Due after ten years		43,506		45,460		-		-
MBS/CMO		134,742		137,523		127		129
	$	230,015	$	236,926	$	251	$	253

Investment securities with a carrying amount of $134.3 million at September 30, 2015 were pledged as collateral on public deposits, securities sold under repurchase agreements and Federal Reserve discount window.

As of September 30, 2015, the Company’s investment portfolio consisted of 367 securities, 28 of which were in an unrealized loss position.

23

The following tables summarize First Defiance’s securities that were in an unrealized loss position at September 30, 2015 and December 31, 2014:

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loses
	(In Thousands)
At September 30, 2015
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	-		$	-	$	-		$	-	$	-
Collateralized mortgage obligations		-		-			8,574		(162	)		8,574		(162	)
Obligations of state and political subdivisions		5,150		(34	)		424		(9	)		5,574		(43	)
Corporate bonds		984		(16	)		-		-			984		(16	)
Held to maturity securities:
FHLMC/FNMA certificates		20		(1	)		9		-			29		(1	)
Total temporarily impaired securities	$	6,154	$	(51	)	$	9,007	$	(171	)	$	15,161	$	(222	)

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loses
	(In Thousands)
At December 31, 2014
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	-		$	980	$	(20	)	$	980	$	(20	)
Collateralized mortgage obligations		4,466		(138	)		14,633		(273	)		19,099		(411	)
Corporate bonds		-		-			994		(6	)		994		(6	)
Obligations of state and political subdivisions		1,194		(8	)		1,499		(19	)		2,693		(27	)
Held to maturity securities:
FHLMC certificates		18		(8	)		-		-			18		(8	)
Total temporarily impaired securities	$	5,678	$	(154	)	$	18,106	$	(318	)	$	23,784	$	(472	)

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

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

24

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

In the three or nine months ended September 30, 2015 and September 30, 2014, management determined there was no OTTI.

The Company holds three CDO’s at September 30, 2015 and December 31, 2014 with a zero value.

The amount of OTTI recognized in accumulated other comprehensive income (“AOCI”) was zero at September 30, 2015 and December 31, 2014.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Proceeds	$	-	$	10,738	$	-	$	14,520
Gross realized gains		-		460		-		1,573
Gross realized losses		-		-		-		(642	)

25

8. Loans

Loans receivable consist of the following:

	September 30, 2015			December 31, 2014
	(In Thousands)
Real Estate:
Secured by 1-4 family residential	$	205,370		$	206,437
Secured by multi-family residential		163,255			156,530
Secured by commercial real estate		758,952			683,958
Construction		129,230			112,385
		1,256,807			1,159,310
Other Loans:
Commercial		402,681			399,730
Home equity and improvement		113,781			111,813
Consumer Finance		15,774			15,466
		532,236			527,009
Total loans		1,789,043			1,686,319
Deduct:
Undisbursed loan funds		(54,484	)		(38,653	)
Net deferred loan origination fees and costs		(1,021	)		(880	)
Allowance for loan loss		(25,209	)		(24,766	)
Totals	$	1,708,329		$	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 September 30, 2015 and 2014 by portfolio segment (In Thousands):

Quarter Ended September 30, 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	$	2,877		$	2,269		$	12,096		$	308		$	5,567		$	2,107		$	160		$	25,384
Charge-Offs		(185	)		0			(64	)		0			(43	)		(110	)		(5	)		(407	)
Recoveries		105			0			25			0			42			76			11			259
Provisions		(18	)		(25	)		96			(69	)		(155	)		152			(8	)		(27	)
Ending Allowance	$	2,779		$	2,244		$	12,153		$	239		$	5,411		$	2,225		$	158		$	25,209

Quarter Ended September 30, 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	$	2,345		$	2,480	$	11,476		$	199	$	6,199		$	1,780		$	148		$	24,627
Charge-Offs		(95	)		-		(246	)		-		(1,272	)		(42	)		(16	)		(1,671	)
Recoveries		13			2		978			-		109			87			16			1,205
Provisions		161			99		(1,121	)		15		1,384			(134	)		2			406
Ending Allowance	$	2,424		$	2,581	$	11,087		$	214	$	6,420		$	1,691		$	150		$	24,567

26

The following table discloses allowance for loan loss activity for the year-to-date periods ended September 30, 2015 and September 30, 2014 by portfolio segment and impairment method (In Thousands):

Year-to-date Period Ended  September 30, 2015	1-4 Family Residential Real Estate			Multi- Family Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer			Total
Beginning Allowance	$	2,494		$	2,453		$	11,268		$	221	$	6,509		$	1,704		$	117		$	24,766
Charge-Offs		(275	)		(114	)		(250	)		0		(68	)		(340	)		(21	)		(1,068	)
Recoveries		178			0			789			0		255			156			40			1,418
Provisions		382			(95	)		346			18		(1,285	)		705			22			93
Ending Allowance	$	2,779		$	2,244		$	12,153		$	239	$	5,411		$	2,225		$	158		$	25,209

Year-to-date Ended September 30, 2014	1-4 Family Residential Real Estate			Multi- Family Residential Real Estate		Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer			Total
Beginning Allowance	$	2,847		$	2,508	$	12,000		$	134	$	5,678		$	1,635		$	148		$	24,950
Charge-Offs		(364	)		-		(514	)		-		(2,770	)		(306	)		(39	)		(3,993	)
Recoveries		167			7		1,901			-		358			172			50			2,655
Provisions		(226	)		66		(2,300	)		80		3,154			190			(9	)		955
Ending Allowance	$	2,424		$	2,581	$	11,087		$	214	$	6,420		$	1,691		$	150		$	24,567

27

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 September 30, 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	$	186	$	-	$	137	$	-	$	11	$	24	$	-	$	358
Collectively evaluated for impairment		2,593		2,244		12,016		239		5,400		2,201		158		24,851
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,779	$	2,244	$	12,153	$	239	$	5,411	$	2,225	$	158	$	25,209
Loans:
Loans individually evaluated for impairment	$	9,417	$	3,139	$	12,914	$	-	$	3,979	$	2,168	$	54	$	31,671
Loans collectively evaluated for impairment		196,331		160,191		748,367		74,677		400,087		112,108		15,706		1,707,467
Loans acquired with deteriorated credit quality		-		-		156		-		18		-		-		174
Total ending loans balance	$	205,748	$	163,330	$	761,437	$	74,677	$	404,084	$	114,276	$	15,760	$	1,739,312

28

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

29

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 September 30, 2015						Nine Months Ended September 30, 2015
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized		Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	5,750	$	67	$	66	$	5,854	$	203	$	201
Residential Non Owner Occupied		3,762		38		38		4,045		117		117
Total Residential Real Estate		9,512		105		104		9,899		320		318
Construction		-		-		-		50		2		2
Multi-Family		3,168		12		11		2,680		25		25
CRE Owner Occupied		6,475		39		39		6,566		117		117
CRE Non Owner Occupied		2,696		29		29		7,445		273		273
Agriculture Land		2,236		21		2		1,741		53		30
Other CRE		1,509		5		5		2,023		31		30
Total Commercial Real Estate		12,916		94		75		17,775		474		450
Commercial Working Capital		1,030		11		11		1,478		38		36
Commercial Other		2,989		7		6		3,483		33		41
Total Commercial		4,019		18		17		4,961		71		77
Home Equity and Home Improvement		2,160		19		19		2,257		60		60
Consumer		58		1		2		55		2		3
Total Impaired Loans	$	31,833	$	249	$	228	$	37,677	$	954	$	935

30

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 September 30, 2014						Nine Months Ended September 30, 2014
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized		Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,242	$	84	$	84	$	6,235	$	250	$	245
Residential Non Owner Occupied		3,537		31		31		3,778		101		101
Total Residential Real Estate		9,779		115		115		10,013		351		346
Construction		261		4		4		261		10		13
Multi-Family		349		1		1		368		3		3
CRE Owner Occupied		8,238		35		29		9,014		108		97
CRE Non Owner Occupied		18,144		200		200		18,656		605		605
Agriculture Land		536		3		2		635		11		7
Other CRE		2,576		5		5		2,075		15		16
Total Commercial Real Estate		29,494		243		236		30,381		739		725
Commercial Working Capital		3,111		9		9		3,107		20		20
Commercial Other		4,325		4		3		4,612		8		6
Total Commercial		7,436		13		12		7,719		28		26
Home Equity and Home Improvement		2,185		25		24		2,240		75		74
Consumer		47		1		1		52		3		3
Total Impaired Loans	$	49,551	$	402	$	393	$	51,034	$	1,209	$	1,190

31

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

	September 30, 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	$	3,852	$	3,746	$	-	$	3,967	$	3,859	$	-
Residential Non Owner Occupied		3,527		3,535		-		3,763		3,670		-
Total 1-4 Family Residential Real Estate		7,379		7,281		-		7,730		7,529		-
Multi-Family Residential Real Estate		3,287		3,139		-		2,627		2,482		-
CRE Owner Occupied		4,163		3,821		-		7,109		6,481		-
CRE Non Owner Occupied		2,631		2,370		-		4,106		3,759		-
Agriculture Land		2,134		2,184		-		213		208		-
Other CRE		1,019		979		-		2,923		2,378		-
Total Commercial Real Estate		9,947		9,354		-		14,351		12,826		-
Construction		-		-		-		150		150		-
Commercial Working Capital		463		467		-		1,155		1,157		-
Commercial Other		2,610		2,611		-		3,966		3,663		-
Total Commercial		3,073		3,078		-		5,121		4,820		-
Home Equity and Home Improvement		2,135		2,084		-		2,192		2,140		-
Consumer Finance		54		54		-		35		34		-
Total loans with no allowance recorded	$	25,875	$	24,990	$	-	$	32,206	$	29,981	$	-
With an allowance recorded:
Residential Owner Occupied	$	1,970	$	1,972	$	182	$	2,112	$	2,114	$	204
Residential Non Owner Occupied		160		164		4		636		638		12
Total 1-4 Family Residential Real Estate		2,130		2,136		186		2,748		2,752		216
Multi-Family Residential Real Estate		-		-		-		-		-		-
CRE Owner Occupied		3,025		2,608		125		2,667		2,257		148
CRE Non Owner Occupied		386		310		4		13,020		12,606		842
Agriculture Land		121		111		1		333		320		10
Other CRE		955		531		7		137		108		3
Total Commercial Real Estate		4,487		3,560		137		16,157		15,291		1,003
Construction		-		-		-		-		-		-
Commercial Working Capital		622		624		8		649		650		21
Commercial Other		273		277		3		264		269		9
Total Commercial		895		901		11		913		919		30
Home Equity and Home Improvement		84		84		24		101		102		24
Consumer Finance		-		-		-		-		-		-
Total loans with an allowance recorded	$	7,596	$	6,681	$	358	$	19,919	$	19,064	$	1,273

* Presented gross of charge offs

32

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:

	September 30, 2015		December 31,  2014
	(In Thousands)
Non-accrual loans	$	16,612	$	24,130
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		16,612		24,130
Real estate and other assets held for sale		4,936		6,181
Total non-performing assets	$	21,548	$	30,311
Troubled debt restructuring, still accruing	$	13,786	$	24,686

The following table presents the aging of the recorded investment in past due and non accrual loans as of September 30, 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	$	139,765	$	-	$	406	$	286	$	692	$	1,422
Residential Non Owner Occupied		63,898		642		128		623		1,393		1,323
Total 1-4 Family Residential Real Estate		203,663		642		534		909		2,085		2,745
Multi-Family Residential Real Estate		161,262		-		-		2,068		2,068		2,491
CRE Owner Occupied		325,006		112		-		2,527		2,639		4,289
CRE Non Owner Occupied		291,214		121		-		357		478		1,055
Agriculture Land		96,007		190		104		-		294		838
Other Commercial Real Estate		45,484		-		-		315		315		1,414
Total Commercial Real Estate		757,711		423		104		3,199		3,726		7,596
Construction		74,604		-		73		-		73		-
Commercial Working Capital		153,408		-		-		166		166		245
Commercial Other		248,227		2		207		2,074		2,283		2,878
Total Commercial		401,635		2		207		2,240		2,449		3,123
Consumer Finance		15,671		62		9		18		89		29
Home Equity/Home Improvement		113,698		459		76		43		578		632
Total Loans	$	1,728,244	$	1,588	$	1,003	$	8,477	$	11,068	$	16,616

33

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 September 30, 2015 and December 31, 2014, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of $20.5 million and $33.0 million, respectively. The Company allocated $256,000 and $1.1 million of specific reserves to those loans at September 30, 2015 and December 31, 2014, and has committed to lend additional amounts totaling up to $81,000 and $69,000 at September 30, 2015 and December 31, 2014, respectively.

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

Of the loans modified in a TDR, $6.8 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 and nine month periods ending September 30, 2015 and September 30, 2014:

	Loans Modified as a TDR for the Three Months Ended September 30, 2015 ($ in thousands)			Loans Modified as a TDR for the Nine Months Ended September 30, 2015 ($ 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	0	$	-	3	$	226
1-4 Family Non Owner Occupied	0		-	4		63
CRE Owner Occupied	1		72	2		632
CRE Non Owner Occupied	0		-	2		252
Agriculture Land	0		-	3		1,552
Other CRE	0		-	0		-
Commercial Working Capital	2		114	4		119
Commercial Other	1		19	2		73
Home Equity and Improvement	4		114	11		217
Consumer Finance	2		2	6		37
Total	10	$	321	37	$	3,171

The loans described above decreased the ALLL by $3,000 in the three month period ending September 30, 2015 and $23,000 in the nine month period ending September 30, 2015.

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	Loans Modified as a TDR for the Three Months Ended September 30, 2014 ($ In Thousands)			Loans Modified as a TDR for the Nine Months Ended September 30, 2014 ($ In Thousands)
Troubled Debt Restructurings	Number of Loans	Recorded Investment (as of period end)		Number of Loans	Recorded Investment (as of period end)
Residential Owner Occupied	2	$	308	17	$	1,680
Residential Non Owner Occupied	2		361	2		361
CRE Owner Occupied	0		-	0		-
CRE Non Owner Occupied	1		135	2		493
Agriculture Land	0		-	0		-
Other CRE	0		-	0		-
Commercial working capital or other	2		24	13		1,700
Home Equity / Improvement	5		234	12		401
Consumer Finance	1		3	3		22
Total	13	$	1,065	49	$	4,657

The loans described above increased the allowance for loan loss by $60,000 in the three month period ending September 30, 2014 and increased the allowance for loan loss by $55,000 in the nine month period ending September 30, 2014.

Of the 2015 modifications, 13 were made TDRs due to the fact that the borrower has been in bankruptcy, 1 was made TDR due to extending the amortization, 1 was made a TDR due to an interest only period, 1 was made a TDR due to extending the maturity, 11 were made TDRs due to advancing funds to a watchlist credit, 3 was to term out a line of credit and 7 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 three and nine month periods ended September 30, 2015 and September 30, 2014:

	Three Months Ended September 30, 2015 ($ in thousands)			Nine Months Ended September 30, 2015 ($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans	Recorded Investment (as of period end)		Number of Loans	Recorded Investment (as of period end)
1-4 Family Owner Occupied	0	$	-	0	$	-
1-4 Family Non Owner Occupied	0		-	1		105
CRE Owner Occupied	0		-	0		-
CRE Non Owner Occupied	0		-	0		-
Agriculture Land	0		-	0		-
Other CRE	0		-	0		-
Commercial Working Capital or Other	1		120	1		120
Commercial Other	5		1,829	5		1,829
Home Equity and Improvement	0		-	1		22
Consumer Finance	0		-	0		-
Total	6	$	1,949	8	$	2,076

The TDRs that subsequently defaulted described above had no effect on the allowance for loan losses for the three and nine month periods ended September 30, 2015.

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	Three Months Ended September 30, 2014 ($ In Thousands)			Nine Months Ended September 30, 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)
Residential Owner Occupied	1	$	80	1	$	80
Residential Non Owner Occupied	0		0	1		182
CRE Owner Occupied	4		146	4		146
CRE Non Owner Occupied	0		-	0		-
Agriculture Land	0		-	0		-
Other CRE	0		-	0		-
Commercial  working capital or other	4		1,269	4		1,269
Home Equity / Improvement	0		-	0		-
Consumer Finance	0		-	0		-
Total	9	$	1,495	10	$	1,677

The TDRs that subsequently defaulted described above decreased the allowance for loan losses by $15,000 for the three and nine month periods ended September 30, 2014.

The terms of certain other loans were modified during the period ending September 30, 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 59 loans were modified under this definition during the three month period ended September 30, 2015 and a total of 212 loans were modified under this definition during the nine month period ended September 30, 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.

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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 September 30, 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	$	5,516	$	150	$	1,970	$	-	$	132,820	$	140,456
1-4 Family Non Owner Occupied		54,283		2,088		4,394		-		4,527		65,292
Total 1-4 Family Real Estate		59,799		2,238		6,364		-		137,347		205,748
Multi-Family Residential Real Estate		159,206		208		3,798		-		118		163,330
CRE Owner Occupied		299,619		20,719		6,489		-		819		327,646
CRE Non Owner Occupied		284,404		2,900		4,371		-		17		291,692
Agriculture Land		92,750		993		2,557		-		-		96,300
Other CRE		41,836		779		2,686		-		498		45,799
Total Commercial Real Estate		718,609		25,391		16,103		-		1,334		761,437
Construction		60,624		-		-		-		14,053		74,677
Commercial Working Capital		149,408		3,350		817		-		-		153,575
Commercial Other		243,224		3,680		3,605		-		-		250,509
Total Commercial		392,632		7,030		4,422		-		-		404,084
Home Equity and Home Improvement		-		-		559		-		113,717		114,276
Consumer Finance		-		-		8		-		15,752		15,760
Total Loans	$	1,390,870	$	34,867	$	31,254	$	-	$	282,321	$	1,739,312

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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 $140,000 as of September 30, 2015.

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9. Mortgage Banking

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

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2015			2014			2015			2014
	(In Thousands)
Gain from sale of mortgage loans	$	1,197		$	973		$	3,728		$	2,601
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		866			870			2,593			2,652
Amortization of mortgage servicing rights		(407	)		(366	)		(1,264	)		(1,026	)
Mortgage servicing rights valuation adjustments		24			68			191			105
		483			572			1,520			1,731
Net revenue from sale and servicing of mortgage loans	$	1,680		$	1,545		$	5,248		$	4,332

The unpaid principal balance of residential mortgage loans serviced for third parties was $1.35 billion at September 30, 2015 and December 31, 2014.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	9,872		$	9,993		$	9,923		$	10,133
Loans sold, servicing retained		449			348			1,255			868
Amortization		(407	)		(366	)		(1,264	)		(1,026	)
Carrying value before valuation allowance at end of period		9,914			9,975			9,914			9,975
Valuation allowance:
Balance at beginning of period		(744	)		(990	)		(911	)		(1,027	)
Impairment recovery (charges)		24			68			191			105
Balance at end of period		(720	)		(922	)		(720	)		(922	)
Net carrying value of MSRs at end of period	$	9,194		$	9,053		$	9,194		$	9,053
Fair value of MSRs at end of period	$	9,629		$	9,933		$	9,629		$	9,933

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

The Company established an accrual for secondary market buy-back losses that resulted in a reversal of $84,000 for the first nine months of 2015 mainly due to no actual losses being recorded in 2015. In the first nine months of 2014, the Company accrued $276,000 which was partially offset by reversing $67,000 of accrued expenses related to the Freddie Mac post-foreclosure review that began in the third quarter of 2013 and was reversed in 2014 with no losses resulting.

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10. Deposits

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

	September 30, 2015		December 31, 2014
	(In Thousands)
Non-interest-bearing checking accounts	$	392,103	$	379,552
Interest-bearing checking and money market accounts		745,233		727,729
Savings deposits		216,613		203,673
Retail certificates of deposit less than $250,000		414,366		422,907
Retail certificates of deposit greater than $250,000		24,738		26,952
	$	1,793,053	$	1,760,813

11. Borrowings

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

	September 30, 2015		December 31, 2014
	(In Thousands)
FHLB Advances:
Single maturity fixed rate advances	$	27,000	$	-
Putable advances		5,000		12,000
Amortizable mortgage advances		8,801		9,544
Total	$	40,801	$	21,544
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

The putable advance can be put back to the Company at the option of the FHLB on a quarterly basis. A $5.0 million putable advance with a weighted average rate of 2.35% was not yet callable by the FHLB at September 30, 2015. The call date for this advance is December 14, 2015 and the maturity date is March 12, 2018. Putable advances are callable at the option of the FHLB on a quarterly basis.

In March 2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust II (Trust Affiliate II) that issued $15 million of Guaranteed Capital Trust Securities (Trust Preferred Securities). In connection with this transaction, the Company issued $15.5 million of Junior Subordinated Deferrable Interest Debentures (Subordinated Debentures) to Trust Affiliate II. The Company formed Trust Affiliate II for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Subordinated Debentures held by Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.Distributions on the Trust Preferred Securities issued by Trust Affiliate II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.5%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was 1.83% as of September 30, 2015 and 1.74% as of December 31, 2014.

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The Trust Preferred Securities issued by Trust Affiliate II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on June 15, 2037, but can be redeemed at the Company’s option at any time now.

The Company also sponsored an affiliated trust, First Defiance Statutory Trust I (Trust Affiliate I), that issued $20 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was 1.71% and 1.62% on September 30, 2015 and December 31, 2014 respectively.

The Trust Preferred Securities issued by Trust Affiliate I are subject to mandatory redemption, in whole or in part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on December 15, 2035, but can be redeemed at the Company’s option at any time now.

The subordinated debentures may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

Interest on both issues of Trust Preferred Securities may be deferred for a period of up to five years at the option of the issuer.

Repurchase Agreements. We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and to facilitate secured short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. We monitor levels on a continuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agent.

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The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2015 and December 31, 2014 is presented in the following tables.

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater  than 90  Days		Total
At September 30, 2015			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	19,618	$	-	$	-	$	-	$	19,618
Collateralized mortgage obligations		34,220		-		-		-		34,220
Total borrowings	$	53,838	$	-	$	-	$	-	$	53,838
Gross amount of recognized liabilities for repurchase agreements									$	53,838

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
At December 31, 2014			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	16,570	$	-	$	-	$	-	$	16,570
Collateralized mortgage obligations		38,189		-		-		-		38,189
Total borrowings	$	54,759	$	-	$	-	$	-	$	54,759
Gross amount of recognized liabilities for repurchase agreements									$	54,759

12. Commitments, Guarantees and Contingent Liabilities

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

Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory and equipment) is obtained based on Management’s credit assessment of the customer.

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

	September 30, 2015				December 31, 2014
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,383	$	82,986	$	37,546	$	69,232
Unused lines of credit		22,767		299,208		20,385		307,449
Standby letters of credit		-		19,799		-		17,886
Total	$	63,150	$	401,993	$	57,931	$	394,567

Commitments to make loans are generally made for periods of 60 days or less. In addition to the above commitments, First Defiance had commitments to sell $24.1 million and $11.6 million of loans to Freddie Mac, Fannie Mae, Federal Home Loan Bank of Cincinnati or BB&T Mortgage at September 30, 2015 and December 31, 2014, respectively.

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13. Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Indiana. The Company is no longer subject to examination by taxing authorities for years before 2010. The Company currently operates primarily in the states of Ohio and Michigan, which tax financial institutions based on their equity rather than their income.

14. Derivative Financial Instruments

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. First Federal had approximately $17.9 million and $7.4 million of interest rate lock commitments at September 30, 2015 and December 31, 2014, respectively. There were $24.1 million and $11.6 million of forward commitments for the future delivery of residential mortgage loans at September 30, 2015 and December 31, 2014, respectively.

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

September 30, 2015

December 31, 2014

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking

Derivatives

$

738

$

(100

)

$

638

$

351

$

(24

)

$

327

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

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2015			2014			2015		2014
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	(94	)	$	(27	)	$	311	$	151

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

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Note 15 - Other Comprehensive Income (Loss)

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

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
	(In Thousands)
Three months ended September 30, 2015:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	2,024		$	709		$	1,315
Reclassification adjustment for net gains included in net income		-			-			-
Total other comprehensive Income (loss)	$	2,024		$	709		$	1,315
Nine months ended September 30, 2015:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	(313	)	$	(108	)	$	(205	)
Reclassification adjustment for net gains included in net income		-			-			-
Total other comprehensive loss	$	(313	)	$	(108	)	$	(205	)

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three months ended September 30, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	707		$	225		$	482
Reclassification adjustment for net gains included in net income		(460	)		(138	)		(322	)
Total other comprehensive income (loss)	$	247		$	87		$	160

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Nine months ended September 30, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	5,172		$	1,764		$	3,408
Reclassification adjustment for net gains included in net income		(931	)		(279	)		(652	)
Total other comprehensive Income (loss)	$	4,241		$	1,485		$	2,756

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

							Accumulated
	Securities			Post-			Other
	Available			retirement			Comprehensive
	For Sale			Benefit			Income
	(In Thousands)
Balance January 1, 2015	$	4,697		$	(583	)	$	4,114
Other comprehensive income (loss) before reclassifications		(205	)		-			(205	)
Amounts reclassified from accumulated other comprehensive income		-			-			-
Net other comprehensive income during period		(205	)		-			(205	)
Balance September 30, 2015	$	4,492		$	(583	)	$	3,909
Balance January 1, 2014	$	906		$	(361	)	$	545
Other comprehensive income (loss) before reclassifications		3,408			-			3,408
Amounts reclassified from accumulated other comprehensive income		(652	)		-			(652	)
Net other comprehensive income during period		2,756			-			2,756
Balance September 30, 2014	$	3,662		$	(361	)	$	3,301

Note 16 – Affordable Housing Projects Tax Credit Partnership

The Company makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

The Company is a limited partner in each LIHTC Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full control over the affairs of the limited partnership. The general partner has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership’s business, transact any business in the limited partnership’s name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement or is negligent in performing its duties.

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The general partner of each limited partnership has both the power to direct the activities which most significantly affect the performance of each partnership and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. Therefore, the Company has determined that it is not the primary beneficiary of any LIHTC partnership. In January of 2014, the FASB issued ASU 2014-01 “Accounting for Investments in Qualified Affordable Housing Projects.” The pronouncement permitted reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and will recognize the net investment performance in the income statement as a component of income tax expense (benefit). The Company elected to early adopt ASU 2014-01 in January 2014. All of the Company’s investments are accounted for under the proportional amortization method, as there were no investments held prior to January of 2014. As of September 30, 2015 and December 31, 2014 the Company had $4.4 million and $4.6 million in qualified investments recorded in other assets and $2.6 million and $3.0 million in unfunded commitments recorded in other liabilities, respectively.

Unfunded Commitments

As of September 30, 2015, the expected payments for unfunded affordable housing commitments were as follows:

(dollars in thousands)	Amount
2015	$	997
2016		612
2017		160
2018		414
2019		93
Thereafter		312
Total Unfunded Commitments	$	2,588

The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the three and nine months ended September 30, 2015 and 2014.

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	Three Months Ended September 30,
(dollars in thousands)	2015		2014
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	118	$	65
Amortization expense in federal income taxes		89		48

	Nine Months Ended September 30,
(dollars in thousands)	2015		2014
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	354	$	397
Amortization expense in federal income taxes		268		296

There were no impairment losses of LIHTC investments for the three and nine months ended September 30, 2015 and 2014.

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

Forward-Looking Information

Certain statements contained in this quarterly report are not historical facts, including but not limited to statements that can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “anticipate”, or “continue” or the negative thereof or other variations thereon or comparable terminology are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those indicated in such statements due to risks, uncertainties and changes with respect to a variety of market and other factors. The Company assumes no obligation to update any forward-looking statements.

General

First Defiance is a unitary thrift holding company that conducts business through its wholly owned subsidiaries, First Federal, First Insurance and First Defiance Risk Management. First Federal is a federally chartered stock savings bank that provides financial services to communities through 33 full service banking centers in communities based in northwest Ohio, northeast Indiana, and southeastern Michigan. First Federal operates one loan production office in central Ohio. First Federal provides a broad range of financial services including checking accounts, savings accounts, certificates of deposit, real estate mortgage loans, commercial loans, consumer loans, home equity loans and trust and wealth management services through its extensive branch network.

First Insurance sells a variety of property and casualty, group health and life, and individual health and life insurance products. Insurance products are sold through First Insurance’s offices in Defiance, Bryan, Bowling Green, Maumee, Oregon and Lima, Ohio areas. On September 1, 2015, First Insurance acquired a group medical benefits business from Buckeye Insurance Consultants, Inc. located in Lima, Ohio for a cash purchase price of $495,000 of which $198,000 is set aside for contingent payments to be paid in cash in 2016, 2017 and 2018 if certain conditions regarding future revenue are met. As of September 30, 2015, management had determined there was goodwill of $273,000 and identifiable intangible assets of $175,000 consisting of a customer relationship intangible of $64,000 and a non-compete intangible of $111,000 related to the acquisition.

First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company that insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

Impact of Legislation - Over the last several years, Congress and the U.S. Department of the Treasury have enacted legislation and taken actions to address the disruptions in the financial system, declines in the housing market, and the overall regulation of financial institutions and the financial system. In this regard, the 2010 Dodd-Frank Act, includes provisions affecting large and small financial institutions alike, including several provisions that profoundly affect the regulation of community banks, thrifts, and bank and thrift holding companies, such as First Defiance. The Dodd-Frank Act relaxed rules regarding interstate branching, allows financial institutions to pay interest on business checking accounts, changed the scope of federal deposit insurance coverage, imposed new capital requirements on bank and thrift holding companies, and imposed limits on debit card interchange fees charged by issuer banks (commonly known as the Durbin Amendment).

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The Dodd-Frank Act also established the CFPB as an independent bureau within the Federal Reserve, which has broad authority to regulate consumer financial products and services and entities offering such products and services, including banks.

The CFPB has indicated that mortgage lending is an area of supervisory focus and that it will concentrate its examination and rulemaking efforts on the variety of mortgage-related topics required under the Dodd-Frank Act, including steering consumers to less-favorable products, discrimination, abusive or unfair lending practices, predatory lending, origination disclosures, minimum mortgage underwriting standards, mortgage loan originator compensation, and servicing practices. The CFPB recently published numerous final regulations impacting the mortgage industry, including rules related to ability-to-pay, mortgage servicing, and mortgage loan originator compensation and more regulations are anticipated. First Defiance cannot predict the content of the final CFPB and other federal agency regulations or the impact they might have on First Defiance’s financial results. The CFPB’s authority over mortgage lending, and its authority to change regulations adopted in the past by other regulators, or to rescind or ignore past regulatory guidance, could increase First Defiance’s compliance costs and litigation exposure.

Volcker Rules - On December 10, 2013, the Board of Governors of the Federal Reserve System, the OCC, the FDIC, the Securities and Exchange Commission, and the Commodity Futures Trading Commission (collectively, “Regulators”) adopted the final version of the Volcker Rule (“Final Volcker Rule”). The Final Volcker Rule restricts United States banks from making certain kinds of speculative investments that do not benefit their customers. The Final Volcker Rule’s purpose is to put in place, as mandated under Section 619 of the Dodd-Frank Act, regulations to help avoid the financial crisis that occurred during the recent past. The Final Volcker Rule is intended to effectively reduce risks posed to banking entities by proprietary trading activities and investments in or relationships with covered funds while permitting banking entities to continue to provide client-oriented financial services that are critical to capital generation and liquid markets.

On January 14, 2014, the Regulators issued an interim final rule (“Interim Final Volcker Rule”) regarding the treatment of certain collateralized debt obligations backed by trust preferred securities (“TruPS-backed CDOs”) under the Final Volcker Rule implementing Section 619 of the Dodd-Frank Act. The Interim Final Volcker Rule, which does not technically amend the Final Volcker Rule but will operate as a “companion rule” to the Final Volcker Rule, specifies that the Final Volcker Rule’s covered fund restrictions do not apply to the ownership by a banking entity of an interest in, or sponsorship of, any issuer of TruPS-backed CDOs if certain conditions are met. Contemporaneously with the Regulators release of the Interim Final Volcker Rule, the Regulators issued a non-exclusive list of issuers of TruPS-backed CDOs that meet the requirements of the Interim Final Volcker Rule. The Interim Final Volcker Rule provides that a banking entity “may rely” on this list.

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

New Capital Rules - The federal banking regulators have adopted risk-based capital guidelines for financial institutions and their holding companies, designed to absorb losses. The guidelines provide a systematic analytical framework, which makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy and minimizes disincentives to holding liquid, low-risk assets. Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.

Prior to January 1, 2015, the guidelines applicable to First Defiance and First Federal included a minimum for the ratio of total capital to risk-weighted assets of 8%, with at least half of the ratio composed of common shareholders’ equity, minority interests in certain equity accounts of consolidated subsidiaries and a limited amount of qualifying preferred stock and qualified trust preferred securities, less goodwill and certain other intangible assets (known as “Tier 1” risk-based capital). The guidelines also provided for a minimum ratio of Tier 1 capital to average assets, or “leverage ratio,” of 3% for savings and loan holding companies that meet certain criteria, including having the highest regulatory rating, and 4% for all other savings and loan holding companies.

The risk-based capital guidelines adopted by the federal banking agencies are based on the “International Convergence of Capital Measurement and Capital Standard” (Basel I), published by the Basel Committee on Banking Supervision (the “Basel Committee”) in 1988. In 2004, the Basel Committee published a new capital adequacy framework (Basel II) for large, internationally active banking organizations and in December 2010 and January 2011, the Basel Committee issued an update to Basel II (“Basel III”). The Basel Committee frameworks did not become applicable to financial institutions supervised in the United States until adopted into United States law or regulations. Although the United States banking regulators imposed some of the Basel II and Basel III rules on financial institutions with $250 billion or more in assets or $10 billion of on-balance sheet foreign exposure, it was not until July 2013 that the United States banking regulators issued final (or, in the case of the FDIC, interim final) new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”). The new minimum capital requirements became effective on January 1, 2015, whereas a new capital conservation buffer and deductions from common equity capital phase in from January 1, 2016, through January 1, 2019, and most deductions from common equity tier 1 capital will phase in from January 1, 2015, through January 1, 2019.

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The new rules include (a) a new common equity tier 1 capital ratio of at least 4.5%, (b) a Tier 1 capital ratio of at least 6.0%, rather than the former 4.0%, (c) a minimum total capital ratio that remains at 8.0%, and (d) a minimum leverage ratio of 4%.

Common equity for the common equity tier 1 capital ratio includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.

Tier 1 capital includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus and trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, includes certain capital instruments (such as subordinated debt) and limited amounts of the allowance for loan and lease losses, subject to new eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels). The deductions phase in from 2015 through 2019.

Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Some of the risk weightings have been changed effective January 1, 2015.

The new rules also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the company does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter. The capital conservation buffer phases in starting on January 1, 2016, at .625%. The implementation of Basel III did not have a material impact on First Defiance’s or First Federal’s capital ratios.

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

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

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

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

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

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

Expansion Opportunities - First Defiance believes it is well positioned to take advantage of acquisitions or other business opportunities in its market areas. First Defiance believes it has a track record of successfully accomplishing both acquisitions and de novo branching in its market area. This track record puts the Company in a solid position to enter or expand its business. First Defiance has successfully integrated acquired institutions in the past. First Defiance will continue to be disciplined as well as opportunistic in its approach to future acquisitions and de novo branching with a focus on its primary geographic market area, which it knows well, and has been competing in for a long period of time as well as surrounding market areas.

Investments - First Defiance invests in U.S. Treasury and federal government agency obligations, obligations of municipal and other political subdivisions, mortgage-backed securities which are issued by federal agencies, corporate bonds, and collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). Management determines the appropriate classification of all such securities at the time of purchase in accordance with FASB ASC Topic 320.

Securities are classified as held-to-maturity when First Defiance has the positive intent and ability to hold the security to maturity. Held-to-maturity securities are stated at amortized cost and had a recorded value of $251,000 at September 30, 2015. Securities not classified as held-to-maturity are classified as available-for-sale, which are stated at fair value and had a recorded value of $236.9 million at September 30, 2015. The available-for-sale portfolio consists of obligations of U.S. Government corporations and agencies ($3.0 million), certain municipal obligations ($90.4 million), CMOs/REMICs ($75.4 million), corporate bonds ($6.0 million), and mortgage backed securities ($62.1 million).

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

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

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

First Federal has a qualified individual in the Credit Department perform a review of all commercial appraisals or evaluations received. If an appraisal or evaluation is not reviewed by credit department personnel, it will be reviewed by a qualified person independent of the transaction. During the review the individual shall review the appraisal for accuracy, reasonableness of assumptions used, appropriateness of comparables used, and the reasonableness of the opinion of value. For appraisals ordered to determine or update collateral values for criticized loans, a qualified individual in the Credit Department will perform a comprehensive review on the appraisal for loan exposure of $250,000 or more. For loans less than $250,000, the workout officer will perform an administrative review.

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

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

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

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

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

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

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

Earnings - The profitability of First Defiance is primarily dependent on its net interest income and non-interest income. Net interest income is the difference between interest income on interest-earning assets, principally loans and securities, and interest expense on interest-bearing deposits, FHLB advances, and other borrowings. The Company’s non-interest income is mainly derived from service fees and other charges, mortgage banking income, and insurance commissions. First Defiance's earnings also depend on the provision for loan losses and non-interest expenses, such as employee compensation and benefits, occupancy and equipment expense, deposit insurance premiums, and miscellaneous other expenses, as well as federal income tax expense.

Changes in Financial Condition

At September 30, 2015, First Defiance's total assets, deposits and stockholders' equity amounted to $2.23 billion, $1.79 billion and $278.6 million, respectively, compared to $2.18 billion, $1.76 billion and $279.5 million, respectively, at December 31, 2014.

Net loans receivable (excluding loans held for sale) increased $86.3 million to $1.71 billion. The variance in loans receivable between September 30, 2015 and December 31, 2014 include increases in commercial real estate loans (up $81.7 million), commercial loans (up $2.9 million), home equity and improvement loans (up $2.0 million), and construction loans (up $1.0 million). These increases were just slightly offset by a decrease in residential real estate loans (down $1.1 million).

The investment securities portfolio decreased $2.5 million to $237.2 million at September 30, 2015 from $239.6 million at December 31, 2014. The decrease is the result of $22.2 million of securities maturing or being called during the first nine months of 2015. This was partially offset by purchases of $20.7 million of securities. There was an unrealized gain in the investment portfolio of $6.9 million at September 30, 2015 compared to an unrealized gain of $7.2 million at December 31, 2014.

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Deposits increased $32.2 million to $1.79 billion at September 30, 2015 from $1.76 billion at December 31, 2014. Non-interest bearing demand deposits increased $12.6 million to $392.1 million, interest-bearing demand deposits and money market accounts increased $17.5 million to $745.2 million and savings deposits increased $12.9 million to $216.6 million. These increases were partially offset by a decrease in retail time deposits of $10.8 million to $439.1 million.

Stockholders’ equity decreased slightly from $279.5 million at December 31, 2014 to $278.6 million at September 30, 2015. The decrease in stockholders’ equity was the result of the $12.0 million cost of repurchasing the warrant issued to the U.S. Treasury under the TARP Capital Purchase Program, $5.3 million of common stock dividends being paid in the first nine months of 2015, and $5.3 million in repurchased common stock in the first nine months of 2015. These were mostly offset by recording net income of $19.9 million and a $1.6 million increase due to stock option exercises.

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Average Balances, Net Interest Income and Yields Earned and Rates Paid

The following table presents for the periods indicated the total dollar amount of interest from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in thousands of dollars and rates, and the net interest margin. The table reports interest income from tax-exempt loans and investment on a tax-equivalent basis. All average balances are based upon daily balances (dollars in thousands).

	Three Months Ended September 30,
	2015							2014
	Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,696,370	$	18,472		4.32	%	$	1,586,652	$	17,406		4.35	%
Securities		236,485		2,105		3.63			235,459		2,144		3.70
Interest bearing deposits		53,627		33		0.24			98,738		64		0.26
FHLB stock		13,802		138		3.97			13,802		137		3.94
Total interest-earning assets		2,000,284		20,748		4.13			1,934,651		19,751		4.06
Non-interest-earning assets		222,559							218,575
Total assets	$	2,222,843						$	2,153,226
Interest-bearing liabilities:
Deposits	$	1,397,965	$	1,363		0.39	%	$	1,396,698	$	1,304		0.37	%
FHLB advances and other		41,047		178		1.72			21,872		131		2.38
Subordinated debentures		36,128		154		1.69			36,129		147		1.61
Securities sold under repurchase agreements		54,598		38		0.28			56,776		41		0.29
Total interest-bearing liabilities		1,529,738		1,733		0.45			1,511,475		1,623		0.43
Non-interest bearing deposits		388,849		-					341,796		-
Total including non-interest bearing demand deposits		1,918,587		1,733		0.36			1,853,271		1,623		0.35
Other non-interest-bearing liabilities		27,021							22,987
Total liabilities		1,945,608							1,876,258
Stockholders' equity		277,235							276,968
Total liabilities and stock- holders' equity	$	2,222,843						$	2,153,226
Net interest income; interest rate spread			$	19,015		3.68	%			$	18,128		3.63	%
Net interest margin (3)						3.78	%						3.73	%
Average interest-earning assets to average interest-bearing liabilities						131	%						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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	Nine Months Ended September 30,
	2015							2014
	Average				Yield/			Average				Yield/
	Balance		Interest (1)		Rate (2)			Balance		Interest (1)		Rate (2)
Interest-earning assets:
Loans receivable	$	1,672,393	$	54,590		4.36	%	$	1,561,118	$	50,996		4.37	%
Securities		241,016		6,369		3.64			218,527		6,091		3.83
Interest bearing deposits		56,315		113		0.27			146,798		283		0.26
FHLB stock		13,802		413		4.00			14,969		502		4.48
Total interest-earning assets		1,983,526		61,485		4.16			1,941,412		57,872		3.99
Non-interest-earning assets		221,609							213,615
Total assets	$	2,205,135						$	2,155,027
Interest-bearing liabilities:
Deposits	$	1,396,731	$	3,947		0.38	%	$	1,401,481	$	3,989		0.38	%
FHLB advances		34,038		461		1.81			22,117		397		2.40
Subordinated debentures		36,129		451		1.67			36,132		439		1.62
Securities sold under repurchase agreements		53,740		113		0.28			53,614		121		0.30
Total interest-bearing liabilities		1,520,638		4,972		0.44			1,513,344		4,946		0.44
Non-interest bearing deposits		379,305		-					343,795		-
Total including non-interest bearing demand deposits		1,899,943		4,972		0.35			1,857,139		4,946		0.36
Other non-interest-bearing liabilities		28,062							22,154
Total liabilities		1,928,005							1,879,293
Stockholders' equity		277,130							275,734
Total liabilities and stock- holders' equity	$	2,205,135						$	2,155,027
Net interest income; interest rate spread			$	56,513		3.72	%			$	52,926		3.55	%
Net interest margin (3)						3.82	%						3.65	%
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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Results of Operations

Three Months Ended September 30, 2015 and 2014

On a consolidated basis, First Defiance’s net income for the quarter ended September 30, 2015 was $6.7 million compared to net income of $7.1 million for the comparable period in 2014. On a per share basis, basic and diluted earnings per common share for the quarter ended September 30, 2015 were both $0.72, compared to basic and diluted earnings per common share of $0.75 and $0.71, respectively, for the same period in 2014. Earnings in the third quarter of 2014 were positively impacted by $299,000 of after tax gains on the sale of securities, a $903,000 tax-free benefit from a bank-owned life insurance policy and a $498,000 tax free gain realized through the company’s deferred compensation plan trust. Additional net adjustments to income taxes of $250,000, which included the write-off of a portion of unused deferred tax assets, negatively impacted third quarter 2014 results. These items combined increased the third quarter 2014 net income by $1.45 million, or $0.15 per diluted common share.

Net Interest Income

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

Net interest income was $18.5 million for the quarter ended September 30, 2015, up from $17.7 million for the same period in 2014. The tax-equivalent net interest margin was 3.78% for the quarter ended September 30, 2015, an increase from 3.73% for the same period in 2014. The increase in margin between the 2014 and 2015 third quarters was due to an increase in interest-earning asset yields, which increased to 4.13% for the quarter ended September 30, 2015, up 7 basis points from 4.06% for the same period in 2014. The cost of interest-bearing liabilities between the two periods increased 2 basis points to 0.45% in the third quarter of 2015 from 0.43% in the same period in 2014. Average loan balances grew $109.7 million year over year which were partially funded by overnight interest bearing deposits which declined $45.1 million for that same period. This change in earning asset mix resulted in a positive impact to the net interest margin. Management continues to analyze and look for additional opportunities to maintain its margin, as well as other alternatives to minimize the impact of a looming rate increase in the near future.

Total interest income increased $980,000 to $20.3 million for the quarter ended September 30, 2015 from $19.3 million for the same period in 2014. Continued steady loan demand and an increase in the average balance of the investment portfolio continued the shift of earning assets out of lower yielding interest bearing deposits into higher yielding earning assets. The yield on total interest earning assets improved to 4.13% for the quarter ended September 30, 2015 from 4.06% for the same period in 2014. The loan portfolio yield decreased slightly to 4.32% for the quarter ended September 30, 2015 from 4.35% for the same period in 2014 while investment portfolio yields declined to 3.63% for the quarter ended September 30, 2015 from 3.70% for the same period in 2014. Income from loans increased to $18.5 million for the quarter ended September 30, 2015 compared to $17.4 million for the same period in 2014 due to $109.7 million of average loan growth year over year as well as a recovery of approximately $55,000 of non-accrual interest as a result of pay-offs and loans being put back on accrual status. Interest income from investments remained steady at $1.7 million for the quarters ended September 30, 2015 and 2014.

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Total interest expense increased $110,000 in the third quarter of 2015 compared to the same period in 2014, to $1.7 million from $1.6 million. There was a 2 basis point increase in the average cost of interest-bearing liabilities in the third quarter of 2015 due to a slight increase in the rates on interest bearing deposits and an increase in the volume of FHLB advances. Interest expense related to interest-bearing deposits increased to $1.4 million in the third quarter of 2015 from $1.3 million in the same period in 2014. Interest expense recognized by the Company related to subordinated debentures was $154,000 in the third quarter of 2015 compared to $147,000 for the same period in 2014. Expenses on FHLB advances and securities sold under repurchase agreements were $178,000 and $38,000 respectively in the third quarter of 2015 compared to $131,000 and $41,000 respectively for the same period in 2014.

Allowance for Loan Losses

The allowance for loan losses represents management’s assessment of the estimated probable incurred credit losses in the loan portfolio at each balance sheet date. Management analyzes the adequacy of the allowance for loan losses regularly through reviews of the loan portfolio. Consideration is given to economic conditions, changes in interest rates and the effect of such changes on collateral values and borrower’s ability to pay, changes in the composition of the loan portfolio and trends in past due and non-performing loan balances. The allowance for loan losses is a material estimate that is susceptible to significant fluctuation and is established through a provision for loan losses based on management’s evaluation of the inherent risk in the loan portfolio. In addition to extensive in-house loan monitoring procedures, the Company utilizes an outside party to conduct an independent loan review of commercial loan and commercial real estate loan relationships. The goal is to have approximately 55% to 60% of the portfolio reviewed annually. This includes all relationships over $5.0 million with new exposure greater than $2.0 million and a sample of those relationships greater than $5.0 million; loan relationships between $1.0 million and $5.0 million with new exposure greater than $750,000 and a sample of those relationships between $1.0 million and $5.0 million; and a sample of relationships less than $1.0 million. Management utilizes the results of this outside loan review to assess the effectiveness of its internal loan grading system as well as to assist in the assessment of the overall adequacy of the allowance for loan losses associated with these types of loans.

The provision for loan losses is determined by management as the amount to be added to the allowance for loan losses after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb incurred credit losses within the existing loan portfolio in the normal course of business. The allowance for loan loss is made up of two basic components. The first component is the specific allowance in which the Company sets aside reserves based on the analysis of individual credits that are cash flow dependent, yet there is a discount between the present value of the future cash flows and the carrying value. This was $358,000 at September 30, 2015. The second component is the general reserve. The general reserve is used to record loan loss reserves for groups of homogenous loans in which the Company estimates the losses incurred in the portfolios based on quantitative and qualitative factors. Due to the uncertainty of risks in the loan portfolio, the Company’s judgment on the amount of the allowance necessary to absorb loans losses is approximate.

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

For purposes of the general reserve analysis, the loan portfolio is stratified into nine different loan pools based on loan type and by market area to allocate historic loss experience. The loss experience factor is then applied to the non-impaired loan portfolio. Beginning June 30, 2015, the Company refined the methodology to its allowance for loan loss calculation pertaining to the general reserve component for non-impaired loans. There was no change to the calculation of the component for reserves on impaired loans. Within the general reserve, the determination of the historical loss component was modified from using a three-year average annual loss rate to a loss migration measurement. The loss migration measurement implemented June 30, 2015, utilizes an average of four (4) four-year loss migration periods for each loan portfolio segment with differentiation between loan risk grades. This approach provides for a more precise reflection of probable incurred losses by risk grade within each loan portfolio segment over an average loan life cycle. Management believes that capturing the risk grade changes and cumulative losses over the life cycle of a loan more accurately depicts management’s estimate of historical losses as well as being more reflective of the ongoing risks in the loan portfolio, thereby requiring less weight to the subjective components of the allowance for loan losses. Prior to June 30, 2015, the approach to this component quantified the historical loss by calculating a rolling twelve quarter average annual loss rate for each portfolio segment, without differentiation between loan risk grades. This modification resulted in a change of the general reserves between the loan portfolio segments but did not have a material impact on the overall allowance for loan losses. The stratification and loss migration analysis of the loan portfolio resulted in an increase in the quantitative general allowance to $9.6 million at September 30, 2015 compared to $7.8 million at December 31, 2014.

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

ECONOMIC

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

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

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ENVIRONMENT

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

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

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

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

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

RISK

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

9) Changes in the political and regulatory environment.

The qualitative analysis at September 30, 2015 indicated a general reserve of $15.3 million compared with $15.7 million at December 31, 2014. Management reviewed the overall economic, environmental and risk factors. During the third quarter, the economic factors were decreased slightly due to the improvement in unemployment rates in the Northwest Ohio, Indiana and Michigan markets. Most national and regional economic indicators have also maintained favorable conditions. The environmental factors were increased due to the strong growth achieved in the first nine months of 2015 amidst highly competitive conditions on pricing and terms, including the continued growth in our new Business Banking initiative, and balances generated from the expansion of our Columbus loan production office. Changes in the commercial lending credit process were also factors considered in the environmental increases. The qualitative risk factors have been decreased as a result of continued favorable trends in asset quality and management’s consideration that implementing loss migration analysis results in more precise calculation of risk.

First Defiance’s general reserve percentages for main loan segments ranged from 0.32% for pass rated construction loans to 13.73% for special mention rated commercial loans at September 30, 2015.

As a result of the quantitative and qualitative analyses, along with the change in specific reserves, the Company recorded a credit provision for loan losses of $27,000 in the third quarter of 2015 compared to an expense of $406,000 for the same period in 2014. The allowance for loan losses was $25.2 million and $24.8 million and represented 1.45% and 1.50% of loans, net of undisbursed loan funds and deferred fees and costs, as of September 30, 2015 and December 31, 2014, respectively. Charge offs of $407,000 were partially offset by recoveries of $259,000, resulting in a reduction to the overall allowance for loan loss of $148,000 for the third quarter of 2015. In management’s opinion, the overall allowance for loan losses of $25.2 million as of September 30, 2015 is adequate.

Management also assesses the value of real estate owned as of the end of each accounting period and recognizes write-downs to the value of that real estate in the income statement if conditions dictate. For the quarter ended September 30, 2015, First Defiance had write-downs that totaled $19,000 for real estate held for sale. Management believes that the values recorded at September 30, 2015 for real estate owned and repossessed assets represent the realizable value of such assets.

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Total classified loans are $31.1 million at September 30, 2015, a significant decrease compared to $47.3 million at December 31, 2014.

First Defiance’s ratio of allowance for loan losses to non-performing loans was 151.8% at September 30, 2015 compared with 102.6% at December 31, 2014. Management monitors collateral values of all loans included on the watch list that are collateral dependent and believes that the allowances for those loans at September 30, 2015 are appropriate. Of the $16.6 million in non-accrual loans at September 30, 2015, $8.1 million or 49.0% are less than 90 days past due.

At September 30, 2015, First Defiance had total non-performing assets of $21.5 million, compared to $30.3 million at December 31, 2014. Non-performing assets include loans that are on non-accrual, real estate owned and other assets held for sale. Non-performing assets at September 30, 2015 and December 31, 2014 by category were as follows:

Table 1 – Nonperforming Asset

	September 30,			December 31,
	2015			2014
	(In Thousands)
Non-performing loans:
One to four family residential real estate	$	2,745		$	3,332
Non-residential and multi-family residential real estate		10,090			15,174
Commercial		3,117			4,993
Construction		-			-
Home equity and improvement		631			619
Consumer Finance		29			12
Total non-performing loans		16,612			24,130
Real estate owned		4,936			6,181
Other repossessed assets		-			-
Total repossessed assets	$	4,936			6,181
Total Nonperforming assets	$	21,548		$	30,311
Restructured loans, accruing	$	13,786		$	24,686
Total nonperforming assets as a percentage of total assets		0.97	%		1.39	%
Total nonperforming loans as a percentage of total loans*		0.96	%		1.47	%
Total nonperforming assets as a percentage of total loans plus REO*		1.24	%		1.83	%
Allowance for loan losses as a percent of total nonperforming assets		116.99	%		81.71	%

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

The decrease in non-performing loans between December 31, 2014 and September 30, 2015 is primarily in commercial real estate loans. The balance of these types of non-performing loans was $5.1 million lower at September 30, 2015 compared to December 31, 2014 mainly due to some of these relationships paying off.

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Non-performing loans in the commercial loan category represented 0.77% of the total loans in those categories at September 30, 2015 compared to 1.25% for the same category at December 31, 2014. Non-performing loans in the commercial real estate loan category represented 1.09% of the total loans in those categories at September 30, 2015 compared to 1.81% for the same category at December 31, 2014. Management believes that the current allowance for loan losses is appropriate and that the provision for loan losses is consistent with both charge-off experience and the risk inherent in the overall credits in the portfolio.

First Federal’s Asset Review Committee meets monthly to review the status of work-out strategies for all criticized relationships, which include all non-accrual loans. Based on such factors as anticipated collateral values in liquidation scenarios, cash flow projections, assessment of net worth of guarantors and all other factors which may mitigate risk of loss, the Asset Review Committee makes recommendations regarding proposed charge-offs which are approved by the Senior Loan Committee or the Loan Loss Reserve Committee.

The following table details net charge-offs and non-accrual loans by loan type. For the nine months ended and as of September 30, 2015, commercial real estate, which represented 51.55% of total loans, accounted for 121.43% of net recoveries and 60.75% of non-accrual loans, and commercial loans, which represented 22.51% of total loans, accounted for 53.43% of net recoveries and 18.76% of non-accrual loans. For the nine months ended and as of September 30, 2014, commercial real estate, which represented 49.65% of total loans, accounted for (104.33)% of net charge-offs (recovery) and 61.59% of non-accrual loans, and commercial loans, which represented 23.35% of total loans, accounted for 180.27% of net charge-offs and 24.55% of non-accrual loans.

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

	For the Nine Months Ended September 30, 2015						As of September 30, 2015
	Net Charge-offs (Recoveries)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non- Accrual Loans
	(In Thousands)							(In Thousands)
Residential	$	97			(27.71	)%	$	2,745		16.52	%
Construction		-			0.00	%		-		0.00	%
Commercial real estate		(425	)		121.43	%		10,090		60.75	%
Commercial		(187	)		53.43	%		3,117		18.76	%
Consumer		(19	)		5.43	%		29		0.17	%
Home equity and improvement		184			(52.57	)%		631		3.80	%
Total	$	(350	)		100.00	%	$	16,612		100.00	%

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	For the Nine Months Ended September 30, 2014						As of September 30, 2014
	Net Charge-offs (Recoveries)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non- Accrual Loans
	(In Thousands)						(In Thousands)
Residential	$	197			14.80	%	$	3,053		13.55	%
Construction		-			0.00	%		-		0.00	%
Commercial real estate		(1,394	)		(104.33	)%		13,873		61.59	%
Commercial		2,412			180.27	%		5,530		24.55	%
Consumer		(11	)		(0.75	)%		-		0.00	%
Home equity and improvement		134			10.01	%		69		0.31	%
Total	$	1,338			100.00	%	$	22,525		100.00	%

Table 3 – Allowance for Loan Loss Activity

	For the Quarter Ended
	3rd 2015			2nd 2015			1st 2015			4th 2014			3rd 2014
	(In Thousands)
Allowance at beginning of period	$	25,384		$	25,302		$	24,766		$	24,567		$	24,627
Provision for credit losses		(27	)		-			120			162			406
Charge-offs:
Residential		185			11			78			61			95
Commercial real estate		64			146			155			505			246
Commercial		43			23			2			212			1,272
Consumer finance		5			13			3			1			16
Home equity and improvement		110			187			43			87			42
Total charge-offs		407			380			281			866			1,671
Recoveries		259			462			697			903			1,205
Net charge-offs (recoveries)		148			(82	)		(416	)		(37	)		466
Ending allowance	$	25,209		$	25,384		$	25,302		$	24,766		$	24,567

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

Table 4 – Allowance for Loan Loss Allocation by Loan Category

	September 30, 2015					June 30, 2015					March 31, 2015					December 31, 2014					September 30, 2014
			Percent of					Percent of					Percent of					Percent of					Percent of
			total loans					total loans					total loans					total loans					total loans
	Amount		by category			Amount		by category			Amount		by category			Amount		by category			Amount		by category
	(Dollars In Thousands)
Residential	$	2,779		11.48	%	$	2,877		11.68	%	$	2,483		11.79	%	$	2,494		12.24	%	$	2,424		12.44	%
Construction		239		7.22	%		308		7.98	%		303		7.25	%		221		6.66	%		214		6.95	%
Commercial real estate		14,397		51.55	%		14,365		50.40	%		14,238		50.77	%		13,721		49.84	%		13,668		49.65	%
Commercial		5,411		22.51	%		5,567		22.85	%		6,766		22.90	%		6,509		23.70	%		6,420		23.35	%
Consumer		158		0.88	%		160		0.85	%		92		0.87	%		117		0.92	%		150		0.99	%
Home equity and improvement		2,225		6.36	%		2,107		6.24	%		1,420		6.42	%		1,704		6.64	%		1,691		6.62	%
	$	25,209		100.00	%	$	25,384		100.00	%	$	25,302		100.00	%	$	24,766		100.00	%	$	24,567		100.00	%

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Key Asset Quality Ratio Trends

Table 5 – Key Asset Quality Ratio Trends

	3rd Qtr 2015			2nd Qtr 2015			1st Qtr 2015			4th Qtr 2014			3rdQtr 2014
Allowance for loan losses / loans*		1.45	%		1.49	%		1.50	%		1.50	%		1.50	%
Allowance for loan losses to net charge-offs		17033.11	%		-30956.10	%		-6082.21	%		-66935.14	%		5271.89	%
Allowance for loan losses / non-performing assets		116.99	%		114.82	%		100.82	%		81.41	%		88.21	%
Allowance for loan losses / non-performing loans		151.75	%		151.66	%		135.28	%		102.64	%		109.07	%
Non-performing assets / loans plus REO*		1.24	%		1.29	%		1.48	%		1.83	%		1.70	%
Non-performing assets / total assets		0.97	%		1.01	%		1.14	%		1.39	%		1.29	%
Net charge-offs / average loans (annualized)		0.03	%		-0.02	%		-0.10	%		-0.01	%		0.12	%

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

Non-Interest Income.

Total non-interest income for the third quarter of 2015 was $8.0 million compared with

$9.4 million in the third quarter of 2014.

Service Fees. Service fees and other charges increased by $139,000 or 5.2% in the third quarter of 2015 compared to the same period in 2014 due to new fee structures and product redesigns implemented late in 2014.

First Federal’s overdraft privilege program generally provides for the automatic payment of modest overdraft limits on all accounts deemed to be in good standing when the account is accessed using paper-based check processing, a teller withdrawal, a point-of-sale terminal, an ACH transaction, an online banking or voice-response transfer, or an ATM. To be in good standing, an account must be brought to a positive balance within a 30-day period and have not excessively used the overdraft privilege program. Overdraft limits are established for all customers without discrimination using a risk assessment approach for each account classification. The approach includes a systematic review and evaluation of the normal deposit flows made to each account classification to establish reasonable and prudent negative balance limits that would be routinely repaid by normal, expected and reoccurring deposits. The risk assessment by portfolio approach assumes a minimal degree of undetermined credit risk associated with unidentified individual accounts that are overdrawn for 30 or more days. Consumer accounts overdrawn for more than 60 days are automatically charged off. Fees are charged as a one-time fee per occurrence, up to five charges per day, and the fee charged for an item that is paid is equal to the fee charged for a non-sufficient fund item that is returned.

Overdrawn balances, net of allowance for losses, are reflected as loans on First Defiance’s balance sheet. The fees charged for this service are established based both on the return of processing costs plus a profit, and on the level of fees charged by competitors in the Company’s market area for similar services. These fees are considered to be compensation for providing a service to the customer and therefore deemed to be noninterest income rather than interest income. Fee income recorded for the quarters ending September 30, 2015 and 2014 related to the overdraft privilege product, net of adjustments to the allowance for uncollectible overdrafts, were $752,000 and $839,000, respectively. Accounts charged off are included in noninterest expense. The allowance for uncollectible overdrafts was $27,000 at September 30, 2015, $16,000 at December 31, 2014 and $16,000 at September 30, 2014.

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Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage loans increased $135,000 to $1.7 million for the third quarter of 2015 compared to $1.5 million for the same period in 2014. Mortgage banking activity was elevated from the third quarter a year ago, with our markets experiencing higher purchase and refinance loan volumes. Gains realized from the sale of mortgage loans increased in the third quarter of 2015 to $1.2 million from $1.0 million in the same period in 2014. Mortgage loan servicing revenue was $866,000 in the third quarter of 2015, down slightly from $870,000 in the third quarter of 2014. The amortization of mortgage servicing rights expense increased $41,000 to $407,000 in the third quarter of 2015 compared to $366,000 for the same period in 2014. The Company recorded a positive valuation adjustment of $24,000 on mortgage servicing rights in the third quarter of 2015 compared to a positive valuation adjustment of $68,000 for the same period in 2014.

Gain on Sale on Non-Mortgage Loans. Gains on the sale of non-mortgages, which include SBA and FSA loans, totaled $543,000 in the third quarter of 2015 compared to $40,000 in the third quarter of 2014. The Company has built up its pipeline of eligible small business administration loans since last year and increased its selling efforts in 2015.

Gain on Sale of Securities. The third quarter 2015 had no gains or losses on the sale of securities, while the third quarter of 2014 included gains of $460,000.

Trust Income. Trust income was $370,000 in the third quarter of 2015, up 17.5% from $315,000 for the same period in 2014.

Income from Bank Owned Life Insurance (“BOLI”). BOLI income decreased $892,000 in the third quarter of 2015 compared to the same period of 2014, resulting from a tax-free benefit from a BOLI policy due to a death claim in 2014.

Other Non-Interest Income. Other income decreased $798,000 in the third quarter of 2015 compared to the same period of 2014, which is mainly the result of a $498,000 tax-free gain realized in 2014 through the Company’s deferred compensation plan trust attributable to the aforementioned death claim.

Non-Interest Expense.

Non-interest expense increased to $16.8 million for the third quarter of 2015, an increase of only $77,000 from the third quarter of 2014.

Compensation and Benefits. Compensation and benefits increased to $9.8 million for the quarter ended September 30, 2015 from $9.3 million for the same period in 2014. The increase is mainly attributable to merit increases and higher incentive compensation.

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Occupancy Expense. Occupancy expense was $1.8 million in the third quarter 2015, up from $1.6 million for the same period in 2014. The increase is attributable to projects relating to preventative maintenance and upkeep of the Company’s branch network.

Other Non-Interest Expense. Other non-interest expense of $2.8 million in the third quarter of 2015, decreased from $3.2 million in the third quarter of 2014 primarily due to reduced costs for advertising and management consulting.

The efficiency ratio, considering tax equivalent interest income and excluding securities gains and losses, for the third quarter of 2015 was 62.41% compared to 62.06% for the same period in 2014.

Income Taxes.

First Defiance computes federal income tax expense in accordance with ASC Topic 740, Subtopic 942, which resulted in an effective tax rate of 30.93% for the quarter ended September 30, 2015 compared to 28.18% for the same period in 2014. The tax rate is lower than the statutory 35% tax rate for the Company mainly because of investments in tax-exempt securities and bank-owned life insurance (“BOLI”). The earnings on tax-exempt securities and BOLI are not subject to federal income tax.

Nine Months Ended September 30, 2015 and 2014

On a consolidated basis, First Defiance’s net income for the nine months ended September 30, 2015 was $19.9 million compared to income of $17.9 million for the same period in 2014. On a per share basis, basic and diluted earnings per common share for the nine months ended September 30, 2015 were $2.15 and $2.11, respectively, compared to basic and diluted earnings per common share of $1.87 and $1.79, respectively, for the same period in 2014.

Net Interest Income

Net interest income was $55.1 million for the nine months ended September 30, 2015 compared to $51.6 million for the same period in 2014. For the nine month period ended September 30, 2015, total interest income increased $3.5 million to $60.1 million compared to $56.5 million for the same period in 2014.

Interest expense increased by $26,000 to $5.0 million for the nine months ended September 30, 2015 compared to $4.9 million for the same period in 2014.

Net interest margin for the first nine months of 2015 was 3.82%, up 17 basis points from the 3.65% margin reported in the nine month period ended September 30, 2014.

Provision for Loan Losses

The provision for loan losses was $93,000 for the nine months ended September 30, 2015, compared to $955,000 during the nine months ended September 30, 2014. Charge-offs for the first nine months of 2015 totaled $1.1 million and recoveries of previously charged off loans totaled $1.4 million for net recoveries of $349,000. By comparison, $4.0 million of charge-offs were recorded in the same period of 2014 and $2.7 million of recoveries were realized for net charge-offs of $1.3 million.

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Non-Interest Income

Total non-interest income decreased to $24.1 million for the nine months ended September 30, 2015 from $24.3 million recognized for the same period in 2014.

Service Fees. Service fees and other charges were $8.0 million for the first nine months of 2015, up from $7.5 million for the same period in 2014.

Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage loans increased $916,000 to $5.2 million for the nine months ended September 30, 2015 from $4.3 million for the same period in 2014. Gains realized from the sale of mortgage loans increased $1.1 million to $3.7 million for the first nine months of 2015 from $2.6 million for the same period in 2014. Mortgage loan servicing revenue remained relatively flat at $2.6 million in the first nine months of 2015 compared to $2.7 million for the same period in 2014. The gains realized from the sale of mortgage loans were partially offset by the amortization of mortgage servicing rights in the amount of $1.3 million in the first nine months of 2015 up from $1.0 for the same period in 2014. The Company recorded a positive valuation adjustment of $191,000 in the nine months ended September 30, 2015 compared to a positive adjustment of $105,000 in the same period of 2014.

Gain on Sale on Non-Mortgage Loans. Gains on the sale of non-mortgages, which include SBA and FSA loans, totaled $776,000 for the first nine months of 2015 compared to $79,000 for the same period in 2014. The Company has built up its pipeline of eligible small business administration loans since last year and increased its selling efforts in 2015.

Gain on Sale of Securities. First Defiance recorded no gains on the sale of investments in the nine months ended 2015 compared to net gains of $931,000 in the same period in 2014.

BOLI and Other Non-Interest Income. The year-to-date decreases of $926,000 and $861,000, respectively, were both impacted by the positive adjustments mentioned above in the quarterly analysis.

Non-Interest Expense

Non-interest expense was $50.5 million for the first nine months of 2015, up slightly from $49.8 million for the same period in 2014.

Compensation and Benefits. Compensation and benefits increased to $27.9 million for the nine months ended September 30, 2015 compared to $26.5 million for the same period in 2014. The increase is mainly attributable to merit increases and higher incentive compensation accruals.

Occupancy Expense. Occupancy expense increased $456,000 to $5.4 million for the nine months ended September 30, 2015, up from $4.9 million for the same period in 2014. The increase is mainly attributable to projects relating to preventative maintenance and upkeep of the Company’s branch network.

70

Data Processing. Data processing expenses increased to $4.7 million in the first nine months of 2015, from $4.3 million for the same period in 2014. This increase is primarily due to Company strategic initiatives in implementing new products and alternative delivery channels for new and existing products.

Other Non-Interest Expenses. Other non-interest expenses decreased $881,000 to $9.8 million for the first nine months of 2015 from $10.6 million for the same period in 2014. The significant year-over-year decrease between 2015 and 2014 includes $786,000 of costs associated with the termination of First Federal’s merger agreement with First Community Bank in the first quarter of 2014.

The efficiency ratio for the first nine months of 2015 was 62.72% compared to 65.26% for the same period in 2014.

Liquidity

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

First Defiance had $20.3 million of cash provided by operating activities during the first nine months of 2015.

At September 30, 2015, First Federal had $123.4 million in outstanding loan commitments and loans in process to be funded generally within the next six months and an additional $341.8 million committed under existing consumer and commercial lines of credit and standby letters of credit. Also at that date, First Federal had commitments to sell $24.1 million of mortgage loans. First Defiance believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate environments. If First Defiance requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial institutions are available.

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

Capital Resources

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

71

Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. The net unrealized gain or loss on available-for-sale securities is generally not included in computing regulatory capital. During the first quarter of 2015, the Company adopted the new Basel III regulatory capital framework as approved by the federal banking agencies. The adoption of this new framework modified the calculation of the various capital ratios, added a new ratio, common equity tier 1, and revised the adequately and well capitalized thresholds. Additionally, under the new rule, in order to avoid limitations on capital distributions, including dividend payments, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019. The amounts shown below as the adequately capitalized ratio plus capital conservation buffer, includes the fully phased-in 2.50% buffer.

The Company met each of the well capitalized ratio guidelines at September 30, 2015. The following table indicates the capital ratios for First Defiance and First Federal at September 30, 2015 and December 31, 2014. (In Thousands):

As of September 30, 2015
	Leverage			Tier 1 Risk- Based			Common Equity Tier 1			Total Risk-Based
First Federal Bank of the Midwest		11.01	%		12.07	%		12.07	%		13.32	%
First Defiance Financial Corp.		11.69	%		12.85	%		12.85	%		14.10	%
Adequately capitalized ratio		4.00	%		6.00	%		4.50	%		8.00	%
Adequately capitalized ratio plus capital conservation buffer (fully phased-in)		4.00	%		8.50	%		7.00	%		10.50	%
Well capitalized ratio (First Federal only)		5.00	%		8.00	%		6.50	%		10.00	%

As of December 31, 2014
	Leverage			Tier 1 Risk- Based			Common Equity Tier 1		Total Risk-Based
First Federal Bank of the Midwest		11.31	%		13.21	%		N/A		14.46	%
First Defiance Financial Corp.		11.89	%		13.89	%		N/A		15.15	%
Adequately capitalized ratio		4.00	%		4.00	%		N/A		8.00	%
Well capitalized ratio (First Federal only)		5.00	%		6.00	%		N/A		10.00	%

Critical Accounting Policies

First Defiance has established various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of its financial statements. The significant accounting policies of First Defiance are described in the footnotes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K. Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. Those policies which are identified and discussed in detail in the Company’s Annual Report on Form 10-K include the Allowance for Loan Losses, Goodwill, and the Valuation of Mortgage Servicing Rights. There have been no material changes in assumptions or judgments relative to those critical policies during the first nine months of 2015. Management has modified the historical loss rate calculation in the allowance for loan loss methodology as described in Note 2 – Significant Accounting Policies. This modification did not have a material impact on the allowance for loan losses.

72

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As discussed in detail in the Annual Report on Form 10-K for the year ended December 31, 2014, First Defiance’s ability to maximize net income is dependent on management’s ability to plan and control net interest income through management of the pricing and mix of assets and liabilities. Because a large portion of assets and liabilities of First Defiance are monetary in nature, changes in interest rates and monetary or fiscal policy affect its financial condition and can have significant impact on the net income of the Company. First Defiance does not use off-balance sheet derivatives to enhance its risk management, nor does it engage in trading activities beyond the sale of mortgage loans.

First Defiance monitors its exposure to interest rate risk on a monthly basis through simulation analysis that measures the impact changes in interest rates can have on net interest income. The simulation technique analyzes the effect of a presumed 100 basis point shift in interest rates (which is consistent with management’s estimate of the range of potential interest rate fluctuations) and takes into account prepayment speeds on amortizing financial instruments, loan and deposit volumes and rates, non-maturity deposit assumptions and capital requirements.

The table below presents, for the twelve months subsequent to September 30, 2015 and December 31, 2014, an estimate of the change in net interest income that would result from a gradual (ramp) and immediate (shock) change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario. Based on our net interest income simulation as of September 30, 2015, net interest income sensitivity to changes in interest rates for the twelve months subsequent to September 30, 2015 was mainly neutral for the ramp and less sensitive for the shock compared to the sensitivity profile for the twelve months subsequent to December 31, 2014. This is due in part to our strategy to grow longer term loans and fund that growth out of existing liquidity.

Net Interest Income Sensitivity Profile
	Impact on Future Annual Net Interest Income
(dollars in thousands)	September 30, 2015					December 31, 2014
Gradual Change in Interest Rates
+200	$	(401	)	-0.53	%	$	702		0.98	%
+100		(346	)	-0.46	%		155		0.22	%
-100		(675	)	-0.89	%		(667	)	-0.93	%
Immediate Change in Interest Rates
+200	$	452		0.60	%	$	2,274		3.16	%
+100		28		0.04	%		877		1.22	%
-100		(1,990	)	-2.62	%		(1,713	)	-2.38	%

To analyze the impact of changes in interest rates in a more realistic manner, non-parallel interest rate scenarios are also simulated. These non-parallel interest rate scenarios indicate that net interest income may decrease from the base case scenario should the yield curve flatten or become inverted for a period of time. Conversely, if the yield curve should steepen, net interest income may increase.

73

The results of all the simulation scenarios are within the board mandated guidelines as of September 30, 2015.

In addition to the simulation analysis, First Defiance also uses an economic value of equity (“EVE”) analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining life of all balance sheet positions. The EVE analysis generally calculates the net present value of First Federal’s assets and liabilities in rate shock environments that range from -400 basis points to +400 basis points. However, the likelihood of a decrease in rates beyond 100 basis points as of September 30, 2015 was considered to be remote given the current interest rate environment and, therefore, was not included in this analysis. The results of this analysis are reflected in the following tables for the nine months ended September 30, 2015 and the year-ended December 31, 2014.

September 30, 2015
Economic Value of Equity
Change in Rates	$ Amount		$ Change			% Change
	(Dollars in Thousands)
+400 bp		474,532		43,215			10.02	%
+ 300 bp		467,418		36,100			8.37	%
+ 200 bp		458,707		27,390			6.35	%
+ 100 bp		447,269		15,951			3.70	%
0 bp		431,317		-			-
- 100 bp		407,168		(24,149	)		(5.60	)%

December 31, 2014
Economic Value of Equity
Change in Rates	$ Amount		$ Change			% Change
	(Dollars in Thousands)
+400 bp		475,594		47,730			11.16	%
+ 300 bp		467,028		39,164			9.15	%
+ 200 bp		457,038		29,174			6.82	%
+ 100 bp		446,184		18,320			4.28	%
0 bp		427,864		-			-
- 100 bp		403,088		(24,776	)		(5.79	)%

Item 4. Controls and Procedures

Disclosure controls are procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

74

An evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of September 30, 2015. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

No changes occurred in the Company’s internal controls over financial reporting during the quarter ended September 30, 2015 that materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

75

FIRST DEFIANCE FINANCIAL CORP.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There are no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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

The following table provides information regarding First Defiance’s purchases of its common stock during the three-month period ended September 30, 2015:

Period	Total Number of  Shares Purchased (1)		Average Price Paid Per  Share		Total Number of  Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (3)
Beginning Balance, July 1, 2015								283,197
July 1 – July 31, 2015		-	$	-		-		283,197
August 1 – August 31, 2015		87,777		37.37		-		195,420
September 1 – September 30, 2015		21,405		37.57		-		174,015
Total		109,182	$	37.41		-		174,015

(1) The share purchases in the second quarter of 2015 were made in conjunction with the cashless exercise of stock options by First Defiance’s employees and directors.

(2) First Defiance’s publicly announced stock repurchase program became effective October 20, 2014. Up to 469,000 shares were authorized to be purchased under the program. There is no expiration date for the program.

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

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

76

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibit 3.1	Articles of Incorporation (1)
Exhibit 3.2	Code of Regulations (1)
Exhibit 3.3	Amendment to Articles of Incorporation (2)
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101	The following financial information from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 is formatted in eXtensible Business Reporting Language (“XBRL”): (i) Unaudited Consolidated Condensed Balance Sheet at September 30, 2015 and December 31, 2014, (ii) Unaudited Consolidated Condensed Statements of Income for the Three and Nine Months ended September 30, 2015 and 2014 (iii) Unaudited Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2015 and 2014, (iv) Unaudited Consolidated Condensed Statements of Changes in Stockholder’ Equity for the Nine Months ended September 30, 2015 and 2014, (v) Unaudited Consolidated Condensed Statements of Cash Flows for the Nine Months ended September 30, 2015 and 2014 and (vi) Notes to Unaudited Consolidated Condensed Financial Statements.

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

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

77

FIRST DEFIANCE FINANCIAL CORP.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	First Defiance Financial Corp.
	(Registrant)
Date: November 6, 2015	By:	/s/ Donald P. Hileman
		Donald P. Hileman
		President and
		Chief Executive Officer
Date: November 6, 2015	By:	/s/ Kevin T. Thompson
		Kevin T. Thompson
		Executive Vice President and
		Chief Financial Officer

78

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Donald P. Hileman, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 6, 2015	/s/ Donald P. Hileman
	Donald P. Hileman
	President and
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Kevin T. Thompson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 6, 2015	/s/ Kevin T. Thompson
	Kevin T. Thompson
	Executive Vice President and
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

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

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

In connection with the Quarterly Report of First Defiance Financial Corp. (the "Company") on Form 10-Q for the period ending September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald P. Hileman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

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

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

Date: November 6, 2015	/s/ Donald P. Hileman
	Donald P. Hileman
	Chief Executive Officer

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

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

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

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

In connection with the Quarterly Report of First Defiance Financial Corp. (the "Company") on Form 10-Q for the period ending September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin T. Thompson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this quarterly report on Form 10-Q that:

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

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

Date: November 6, 2015	/s/ Kevin T. Thompson
	Kevin T. Thompson
	Chief Financial Officer

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

XML

Basis of Presentation (Details Textual) - USD ($)	Sep. 30, 2015	Sep. 01, 2015	Dec. 31, 2014
Goodwill	$ 61,798,000		$ 61,525,000
Buckeye Insurance Consultants, Inc [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Cash and Equivalents		$ 495,000
Business Combination, Contingent Consideration, Liability		$ 198,000
Goodwill	273,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total	175,000
Buckeye Insurance Consultants, Inc [Member] | Customer Relationships [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total	64,000
Buckeye Insurance Consultants, Inc [Member] | Noncompete Agreements [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total	$ 111,000

XML

Investment Securities (Details 1) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Available-for-sale, Due in one year or less, Amortized Cost		$ 1,250
Available-for-sale, Due after one year through five years, Amortized Cost		15,188
Available-for-sale, Due after five years through ten years, Amortized Cost		35,329
Available-for-sale, Due after ten years, Amortized Cost		43,506
Available-for-sale, MBS/CMO/REMIC, Amortized Cost		134,742
Available-for-sale, Amortized Cost		230,015
Available-for-sale, Due in one year or less, Fair Value		1,254
Available-for-sale, Due after one year through five years, Fair Value		15,501
Available-for-sale, Due after five years through ten years, Fair Value		37,188
Available-for-sale, Due after ten years, Fair Value		45,460
Available-for-sale, MBS/CMO/REMIC, Fair Value		137,523
Available-for-sale, Fair Value		236,926	$ 239,321
Held-to-maturity Securities, Due in one year or less, Amortized Cost		0
Held-to-maturity Securities, Due after one year through five years,Amorized Cost		124
Held-to-maturity,Securities, Due after five years through ten years, Amortized Cost		0
Held-to-maturity Securities, Due after ten years, Amortized Cost		0
Held-to-maturity, MBS/CMO, Amortized Cost		127
Held-to-maturity, Amortized Cost	[1]	251	313
Held-to-maturity Securities, Due in one year or less, Fair Value		0
Held-to-maturity Securities, Due after one year through five years, Fair Value		124
Held-to-maturity, Securites, Due after five years through ten years, Fair Value		0
Held-to-maturity Securities, Due after ten years, Fair Value		0
Held-to-maturity, MBS/CMO, Fair Value		129
Held-to-maturity, Fair Value	[1]	$ 253	$ 308

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

XML

Stock Compensation Plans (Details 2)	9 Months Ended
	Sep. 30, 2015 $ / shares shares
Shares, Unvested at September 30, 2015	8,427
Restricted Stock Units (RSUs) [Member]
Shares, Unvested at January 1, 2015	91,812
Shares, Granted	24,757
Shares, Vested	(12,846)
Shares, Forfeited	(29,178)
Shares, Unvested at September 30, 2015	74,545
Weighted-Average Grant Date Fair Value, Unvested at January 1, 2015 | $ / shares	$ 21
Weighted-Average Grant Date Fair Value, Granted | $ / shares	32.3
Weighted-Average Grant Date Fair Value, Vested | $ / shares	17.2
Weighted-Average Grant Date Fair Value, Forfeited | $ / shares	19.48
Weighted-Average Grant Date Fair Value, Unvested at September 30, 2015 | $ / shares	$ 25.86
Stock Grants [Member]
Shares, Unvested at January 1, 2015	5,767
Shares, Granted	15,506
Shares, Vested	(12,846)
Shares, Forfeited	0
Shares, Unvested at September 30, 2015	8,427
Weighted-Average Grant Date Fair Value, Unvested at January 1, 2015 | $ / shares	$ 25.97
Weighted-Average Grant Date Fair Value, Granted | $ / shares	19.91
Weighted-Average Grant Date Fair Value, Vested | $ / shares	17.2
Weighted-Average Grant Date Fair Value, Forfeited | $ / shares	0
Weighted-Average Grant Date Fair Value, Unvested at September 30, 2015 | $ / shares	$ 28.19

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Mortgage Banking (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Mortgage servicing assets:
Balance at beginning of period	$ 9,872	$ 9,993	$ 9,923	$ 10,133
Loans sold, servicing retained	449	348	1,255	868
Amortization	(407)	(366)	(1,264)	(1,026)
Carrying value before valuation allowance at end of period	9,914	9,975	9,914	9,975
Valuation allowance:
Balance at beginning of period	(744)	(990)	(911)	(1,027)
Impairment recovery (charges)	24	68	191	105
Balance at end of period	(720)	(922)	(720)	(922)
Net carrying value of MSRs at end of period	9,194	9,053	9,194	9,053
Fair value of MSRs at end of period	$ 9,629	$ 9,933	$ 9,629	$ 9,933

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Investment Securities (Details 2) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Held to maturity securities:
Total temporarily impaired securities, Duration Unrealized Loss Position, Less Than Twelve Months, Fair Value	$ 6,154	$ 5,678
Total temporarily impaired securities, Duration of Unrealized Loss Position, Less Than 12 Months, Gross Unrealized Loss	(51)	(154)
Total temporarily impaired securities, Duration of Unrealized Loss Position, Twelve Months Or Longer, Fair Value	9,007	18,106
Total temporarily impaired securities, Duration of Unrealized Loss Position, Twelve Months or Longer, Gross Unrealized Loss	(171)	(318)
Total temporarily impaired securities, Duration of Unrealized Loss Position, Fair Value	15,161	23,784
Total temporarily impaired securities, Duration of Unrealized Loss Position, Gross Unrealized Loss	(222)	(472)
Federal Home Loan Mortgage Corporation Certificates and Obligations (Fhlmc) [Member]
Available-for-sale securities, Total, Fair Value	29
Available-for-sale securities, Total, Unrealized Loss	(1)
Held to maturity securities:
Held-to-maturity Securities, Duration of Unrealized Loss Position, Less than Twelve Months, Fair Value		18
Held-to-maturity Securities, Duration of Unrealized Loss Position, Less than 12 Months, Gross Unrealized Loss		(8)
Held-to-maturity Securities, Duration of Unrealized Loss Position, Twelve Months or Longer, Fair Value		0
Held-to-maturity Securities, Duration of Unrealized Loss Position, 12 Months or Longer, Gross Unrealized Loss		0
Held-to-maturity Securities, Duration of Unrealized Loss Position, Fair Value	20	18
Held-to-maturity Securities, Duration of Unrealized Loss Position, Gross Unrealized Loss	(1)	(8)
Total temporarily impaired securities, Duration of Unrealized Loss Position, Fair Value	9
Total temporarily impaired securities, Duration of Unrealized Loss Position, Gross Unrealized Loss	0
Collateralized Mortgage Obligations [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	0	4,466
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	0	(138)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	8,574	14,633
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(162)	(273)
Available-for-sale securities, Total, Fair Value	8,574	19,099
Available-for-sale securities, Total, Unrealized Loss	(162)	(411)
Corporate Bond Securities [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	984	0
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(16)	0
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	0	994
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	0	(6)
Available-for-sale securities, Total, Fair Value	984	994
Available-for-sale securities, Total, Unrealized Loss	(16)	(6)
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	5,150	1,194
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	(34)	(8)
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	424	1,499
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	(9)	(19)
Available-for-sale securities, Total, Fair Value	5,574	2,693
Available-for-sale securities, Total, Unrealized Loss	(43)	(27)
Us Government Corporations and Agencies Securities [Member]
Available-for-sale securities, Duration of Unrealized Loss Position, Less than 12 Month, Fair Value	0	0
Available-for-sale Securities, Duration of Unrealized Loss Position, Less than 12 Month, Gross Unrealized Loss	0	0
Available-for-sale securities, Duration of Unrealized Loss Position, 12 Month or Longer, Fair Value	0	980
Available-for-sale Securities, Duration of Unrealized Loss Position, 12 Month or Longer, Gross Unrealized Loss	0	(20)
Available-for-sale securities, Total, Fair Value	0	980
Available-for-sale securities, Total, Unrealized Loss	$ 0	$ (20)

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Derivative Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives Assets, Carrying Value	$ 738	$ 351
Mortgage Banking Derivatives Liabilities, Carrying Value	100	24
Mortgage Banking Derivatives, Net Carrying Value	$ 638	$ 327

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Stock Compensation Plans (Details)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Expected average risk-free rate	2.04%	1.51%
Expected average life	10 years	7 years 5 months 8 days
Expected volatility	42.00%	44.62%
Expected dividend yield	2.10%	2.22%

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Deposits (Tables)

9 Months Ended

Sep. 30, 2015

Deposits [Abstract]

Deposits [Table Text Block]

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

	September 30, 2015		December 31, 2014
	(In Thousands)
Non-interest-bearing checking accounts	$	392,103	$	379,552
Interest-bearing checking and money market accounts		745,233		727,729
Savings deposits		216,613		203,673
Retail certificates of deposit less than $250,000		414,366		422,907
Retail certificates of deposit greater than $250,000		24,738		26,952
	$	1,793,053	$	1,760,813

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Derivative Financial Instruments (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives - Gain (Loss)	$ (94)	$ (27)	$ 311	$ 151

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Borrowings (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
FHLB Advances:
Single maturity fixed rate advances	$ 27,000	$ 0	$ 0
Putable advances	5,000		12,000
Amortizable mortgage advances	8,801		9,544
Total	40,801		21,544
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$ 36,083		$ 36,083

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Investment Securities (Details Textual) $ in Millions	Sep. 30, 2015 USD ($)
Security Owned and Pledged as Collateral Carrying Value	$ 134.3
Investment Portfolio, Number of Securities	367
Investment Portfolio, Number of Securities, Unrealized Loss	28

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Commitments, Guarantees and Contingent Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fixed Rate, Commitments to make loans	$ 40,383	$ 37,546
Fixed Rate, Unused lines of credit	22,767	20,385
Fixed Rate, Standby letters of credit	0	0
Fixed Rate, Total	63,150	57,931
Variable Rate, Commitments to make loans	82,986	69,232
Variable Rate, Unused lines of credit	299,208	307,449
Variable Rate, Standby letters of credit	19,799	17,886
Variable Rate, Total	$ 401,993	$ 394,567

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Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Securities available for sale and transferred securities: Before Tax Amount
Change in net unrealized gain (loss) during the period		$ 2,024	$ 707	$ (313)	$ 5,172
Reclassification adjustment for net gains included in net income	[1]	0	(460)	0	(931)
Total other comprehensive Income (loss)		2,024	247	(313)	4,241
Securities available for sale and transferred securities: Tax Expense (Benefit)
Change in net unrealized gain (loss) during the period		709	225	(108)	1,764
Reclassification adjustment for net gains included in net income		0	(138)	0	(279)
Total other comprehensive Income (loss)		709	87	(108)	1,485
Securities available for sale and transferred securities: Net of Tax Amount
Change in net unrealized gain (loss) during the period		1,315	482	(205)	3,408
Reclassification adjustment for net gains included in net income		0	(322)	0	(652)
Total other comprehensive Income (loss)		$ 1,315	$ 160	$ (205)	$ 2,756

[1] Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended September 30, 2015 and 2014 was $0 and $138, respectively. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the nine months ended September 30, 2015 and 2014 was $0 and $279, respectively.

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Commitments, Guarantees and Contingent Liabilities (Details Textual) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Line of Credit Facility, Period	60 days or less
Commitments and Loans, Available to Sell	$ 24.1	$ 11.6

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Mortgage Banking (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items]
Residential Mortgage Loans, Unpaid Balance	$ 1,350,000,000		$ 1,350,000,000
Accrual For Estimated Secondary Market Buy Back Losses	$ 84,000
Accrual Reversal Amount		$ 67,000
Secondary Market Buy Back Expense		$ 276,000

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Affordable Housing Projects Tax Credit Partnership

9 Months Ended

Sep. 30, 2015

Affordable Housing Projects Tax Credit Partnership [Abstract]

Affordable Housing Program [Text Block]

Note 16 – Affordable Housing Projects Tax Credit Partnership

The Company makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

The Company is a limited partner in each LIHTC Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full control over the affairs of the limited partnership. The general partner has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership’s business, transact any business in the limited partnership’s name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement or is negligent in performing its duties.

The general partner of each limited partnership has both the power to direct the activities which most significantly affect the performance of each partnership and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. Therefore, the Company has determined that it is not the primary beneficiary of any LIHTC partnership. In January of 2014, the FASB issued ASU 2014-01 “Accounting for Investments in Qualified Affordable Housing Projects.” The pronouncement permitted reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and will recognize the net investment performance in the income statement as a component of income tax expense (benefit). The Company elected to early adopt ASU 2014-01 in January 2014. All of the Company’s investments are accounted for under the proportional amortization method, as there were no investments held prior to January of 2014. As of September 30, 2015 and December 31, 2014 the Company had $4.4 million and $4.6 million in qualified investments recorded in other assets and $2.6 million and $3.0 million in unfunded commitments recorded in other liabilities, respectively.

 

Unfunded Commitments

As of September 30, 2015, the expected payments for unfunded affordable housing commitments were as follows:

(dollars in thousands)	Amount
2015	$	997
2016		612
2017		160
2018		414
2019		93
Thereafter		312
Total Unfunded Commitments	$	2,588

The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended September 30,
(dollars in thousands)	2015		2014
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	118	$	65
Amortization expense in federal income taxes		89		48

	Nine Months Ended September 30,
(dollars in thousands)	2015		2014
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	354	$	397
Amortization expense in federal income taxes		268		296

There were no impairment losses of LIHTC investments for the three and nine months ended September 30, 2015 and 2014.

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Dividends on Common Stock (Details Textual) - $ / shares	3 Months Ended						9 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Sep. 30, 2015	Sep. 30, 2014
Common Stock, Dividends, Per Share, Cash Paid	$ 0.20	$ 0.20	$ 0.175	$ 0.15	$ 0.15	$ 0.15
Common Stock, Dividends, Per Share, Declared	$ 0.2	$ 0.20	$ 0.175	$ 0.15	$ 0.15	$ 0.15	$ 0.575	$ 0.45

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Fair Value (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Impaired loans
Total impaired loans	$ 5,200	$ 7,791
Mortgage servicing rights	874	1,034
Real estate held for sale
Total real estate held for sale	351	739
One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	278	419
Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	102	269
Commercial Real Estate [Member]
Impaired loans
Total impaired loans	4,726	6,665
Real estate held for sale
Total real estate held for sale	285	739
Home Equity and Improvement [Member]
Impaired loans
Total impaired loans	94	98
Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale	66	0
Commercial Loan [Member]
Impaired loans
Total impaired loans	0	340
Fair Value, Inputs, Level 1 [Member]
Impaired loans
Total impaired loans	0	0
Mortgage servicing rights	0	0
Real estate held for sale
Total real estate held for sale	0	0
Fair Value, Inputs, Level 1 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Real estate held for sale
Total real estate held for sale	0	0
Fair Value, Inputs, Level 1 [Member] | Home Equity and Improvement [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 1 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale	0	0
Fair Value, Inputs, Level 1 [Member] | Commercial Loan [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member]
Impaired loans
Total impaired loans	0	0
Mortgage servicing rights	874	1,034
Real estate held for sale
Total real estate held for sale	0	0
Fair Value, Inputs, Level 2 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	0	0
Real estate held for sale
Total real estate held for sale	0	0
Fair Value, Inputs, Level 2 [Member] | Home Equity and Improvement [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 2 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale	0	0
Fair Value, Inputs, Level 2 [Member] | Commercial Loan [Member]
Impaired loans
Total impaired loans	0	0
Fair Value, Inputs, Level 3 [Member]
Impaired loans
Total impaired loans	5,200	7,791
Mortgage servicing rights	0	0
Real estate held for sale
Total real estate held for sale	351	739
Fair Value, Inputs, Level 3 [Member] | One To Four Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	278	419
Fair Value, Inputs, Level 3 [Member] | Multi Family Residential Real Estate [Member]
Impaired loans
Total impaired loans	102	269
Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate [Member]
Impaired loans
Total impaired loans	4,726	6,665
Real estate held for sale
Total real estate held for sale	285	739
Fair Value, Inputs, Level 3 [Member] | Home Equity and Improvement [Member]
Impaired loans
Total impaired loans	94	98
Fair Value, Inputs, Level 3 [Member] | Residential Mortgage [Member]
Real estate held for sale
Total real estate held for sale	66	0
Fair Value, Inputs, Level 3 [Member] | Commercial Loan [Member]
Impaired loans
Total impaired loans	$ 0	$ 340

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Borrowings (Details Textual) - USD ($) $ in Millions	3 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2007	Sep. 30, 2015	Dec. 31, 2005	Dec. 31, 2014
Putable Advances [Member]
Federal Home Loan Bank Advances Balance Amount Yet To Be Called Series1		$ 5.0
Federal home Loan Bank Advances Interest Rate On Balance Amount Yet To Be Called Series1		2.35%
Trust Affiliate I [Member]
Issuance Of Trust Preferred Securities			$ 20.0
Issuance Of Subordinated Debentures			$ 20.6
Coupon Rate On Preferred Securities, Period End		1.71%		1.62%
Preferred Securities Variable Interest Rate			LIBOR rate plus 1.38%
Trust Affiliate II [Member]
Issuance Of Trust Preferred Securities	$ 15.0
Issuance Of Subordinated Debentures	$ 15.5
Coupon Rate On Preferred Securities, Period End		1.83%		1.74%
Preferred Securities Variable Interest Rate	LIBOR rate plus 1.5%
Trust Affiliate II [Member] | Strike Rate Advances [Member]
Federal Home Loan Bank Advances Branch of Fhlb Bank Last Due Date		March 12, 2018

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Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2015

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

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

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

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
	(In Thousands)
Three months ended September 30, 2015:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	2,024	$	709	$	1,315
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive Income (loss)	$	2,024	$	709	$	1,315
Nine months ended September 30, 2015:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	(313)	$	(108)	$	(205)
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive loss	$	(313)	$	(108)	$	(205)

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
Three months ended September 30, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	707	$	225	$	482
Reclassification adjustment for net gains included in net income		(460)		(138)		(322)
Total other comprehensive income (loss)	$	247	$	87	$	160

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
Nine months ended September 30, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	5,172	$	1,764	$	3,408
Reclassification adjustment for net gains included in net income		(931)		(279)		(652)
Total other comprehensive Income (loss)	$	4,241	$	1,485	$	2,756

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

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

					Accumulated
	Securities		Post-		Other
	Available		retirement		Comprehensive
	For Sale		Benefit		Income
	(In Thousands)
Balance January 1, 2015	$	4,697	$	(583)	$	4,114
Other comprehensive income (loss) before reclassifications		(205)		-		(205)
Amounts reclassified from accumulated other comprehensive income		-		-		-
Net other comprehensive income during period		(205)		-		(205)
Balance September 30, 2015	$	4,492	$	(583)	$	3,909
Balance January 1, 2014	$	906	$	(361)	$	545
Other comprehensive income (loss) before reclassifications		3,408		-		3,408
Amounts reclassified from accumulated other comprehensive income		(652)		-		(652)
Net other comprehensive income during period		2,756		-		2,756
Balance September 30, 2014	$	3,662	$	(361)	$	3,301

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Earnings Per Common Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	6,250	10,500	16,750	43,000

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Loans (Details 9) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 1,739,312	$ 1,651,967
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,390,870	1,280,508
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	34,867	43,804
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	31,254	46,937
Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	478
Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	282,321	280,240
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	140,456	143,080
Residential Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	5,516	4,230
Residential Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	150	131
Residential Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,970	3,048
Residential Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	365
Residential Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	132,820	135,306
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	65,292	63,784
Residential Non Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	54,283	51,327
Residential Non Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,088	2,404
Residential Non Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,394	4,872
Residential Non Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	7
Residential Non Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,527	5,174
One To Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	205,748	206,864
One To Four Family Residential Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	59,799	55,557
One To Four Family Residential Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,238	2,535
One To Four Family Residential Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	6,364	7,920
One To Four Family Residential Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	372
One To Four Family Residential Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	137,347	140,480
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	163,330	156,660
Multi Family Residential Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	159,206	152,290
Multi Family Residential Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	208	220
Multi Family Residential Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,798	3,236
Multi Family Residential Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Multi Family Residential Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	118	914
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	327,646	302,982
Commercial Real Estate Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	299,619	273,406
Commercial Real Estate Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	20,719	18,448
Commercial Real Estate Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	6,489	9,953
Commercial Real Estate Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	819	1,175
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	291,692	245,184
Commercial Real Estate Non Owner Occupied [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	284,404	224,073
Commercial Real Estate Non Owner Occupied [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,900	7,898
Commercial Real Estate Non Owner Occupied [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,371	13,186
Commercial Real Estate Non Owner Occupied [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Non Owner Occupied [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	17	27
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	96,300	93,543
Agriculture Land [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	92,750	90,875
Agriculture Land [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	993	1,849
Agriculture Land [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,557	819
Agriculture Land [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Agriculture Land [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	45,799	44,248
Commercial Real Estate Other Receivable [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	41,836	40,147
Commercial Real Estate Other Receivable [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	779	63
Commercial Real Estate Other Receivable [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	2,686	3,466
Commercial Real Estate Other Receivable [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate Other Receivable [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	498	572
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	761,437	685,957
Commercial Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	718,609	628,501
Commercial Real Estate [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	25,391	28,258
Commercial Real Estate [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	16,103	27,424
Commercial Real Estate [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Real Estate [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	1,334	1,774
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	74,677	73,722
Construction Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	60,624	62,355
Construction Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Construction Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	150
Construction Loans [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Construction Loans [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	14,053	11,217
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	153,575	135,960
Commercial Working Capital [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	149,408	128,229
Commercial Working Capital [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,350	6,287
Commercial Working Capital [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	817	1,444
Commercial Working Capital [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Working Capital [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	250,509	265,071
Commercial Loans Other [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	243,224	253,576
Commercial Loans Other [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,680	6,504
Commercial Loans Other [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,605	4,991
Commercial Loans Other [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loans Other [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	404,084	401,031
Commercial Loan [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	392,632	381,805
Commercial Loan [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	7,030	12,791
Commercial Loan [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	4,422	6,435
Commercial Loan [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Commercial Loan [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	114,276	112,282
Home Equity and Home Improvement [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Home Equity and Home Improvement [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	559	1,647
Home Equity and Home Improvement [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	106
Home Equity and Home Improvement [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	113,717	110,529
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	15,760	15,451
Consumer Loan [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Loan [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Loan [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	8	125
Consumer Loan [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	0	0
Consumer Loan [Member] | Not Graded [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 15,752	$ 15,326

XML

Loans (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	$ 31,833	$ 49,551	$ 37,677	$ 51,034
Interest Income Recognized	249	402	954	1,209
Cash Basis Income Recognized	228	393	935	1,190
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	5,750	6,242	5,854	6,235
Interest Income Recognized	67	84	203	250
Cash Basis Income Recognized	66	84	201	245
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	3,762	3,537	4,045	3,778
Interest Income Recognized	38	31	117	101
Cash Basis Income Recognized	38	31	117	101
Total Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	9,512	9,779	9,899	10,013
Interest Income Recognized	105	115	320	351
Cash Basis Income Recognized	104	115	318	346
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	0	261	50	261
Interest Income Recognized	0	4	2	10
Cash Basis Income Recognized	0	4	2	13
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	3,168	349	2,680	368
Interest Income Recognized	12	1	25	3
Cash Basis Income Recognized	11	1	25	3
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	6,475	8,238	6,566	9,014
Interest Income Recognized	39	35	117	108
Cash Basis Income Recognized	39	29	117	97
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,696	18,144	7,445	18,656
Interest Income Recognized	29	200	273	605
Cash Basis Income Recognized	29	200	273	605
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,236	536	1,741	635
Interest Income Recognized	21	3	53	11
Cash Basis Income Recognized	2	2	30	7
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	1,509	2,576	2,023	2,075
Interest Income Recognized	5	5	31	15
Cash Basis Income Recognized	5	5	30	16
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	12,916	29,494	17,775	30,381
Interest Income Recognized	94	243	474	739
Cash Basis Income Recognized	75	236	450	725
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	1,030	3,111	1,478	3,107
Interest Income Recognized	11	9	38	20
Cash Basis Income Recognized	11	9	36	20
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,989	4,325	3,483	4,612
Interest Income Recognized	7	4	33	8
Cash Basis Income Recognized	6	3	41	6
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	4,019	7,436	4,961	7,719
Interest Income Recognized	18	13	71	28
Cash Basis Income Recognized	17	12	77	26
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	2,160	2,185	2,257	2,240
Interest Income Recognized	19	25	60	75
Cash Basis Income Recognized	19	24	60	74
Consumer Finance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Balance	58	47	55	52
Interest Income Recognized	1	1	2	3
Cash Basis Income Recognized	$ 2	$ 1	$ 3	$ 3

XML

Stock Compensation Plans (Details 1) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($) $ / shares shares
Options outstanding, January 1, 2015	173,720
Options Outstanding, Forfeited or cancelled	(5,100)
Options Outstanding, Exercised	(81,800)
Options Outstanding, Granted	6,250
Options outstanding, September 30, 2015	93,070
Options Outstanding, Vested or expected to vest at September 30, 2015	93,070
Options Outstanding, Exercisable at September 30, 2015	78,420
Weighted Average Exercise Price, Outstanding, January 1, 2015 | $ / shares	$ 20.8
Weighted Average Exercise Price, Forfeited or cancelled | $ / shares	25.36
Weighted Average Exercise Price, Exercised | $ / shares	22
Weighted Average Exercise Price, Granted | $ / shares	32.94
Weighted Average Exercise Price, Outstanding, September 30, 2015 | $ / shares	20.32
Weighted Average Exercise Price, Vested or expected to vest at September 30, 2015 | $ / shares	20.32
Weighted Average Exercise Price, Exercisable at September 30, 2015 | $ / shares	$ 18.6
Weighted Average Remaining Contractual Term (in years), Outstanding, September 30, 2015	3 years 6 months 14 days
Weighted Average Remaining Contractual Term (in years), Vested or expected to vest at September 30, 2015	3 years 6 months 14 days
Weighted Average Remaining Contractual Term (in years), Exercisable at September 30, 2015	2 years 6 months 22 days
Aggregate Intrinsic Value, Outstanding, September 30, 2015 | $	$ 1,512
Aggregate Intrinsic Value, Vested or expected to vest at September 30, 2015 | $	1,512
Aggregate Intrinsic Value, Exercisable at September 30, 2015 | $	$ 1,409

XML

Consolidated Condensed Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Operating Activities
Net income	$ 19,860	$ 17,937
Items not requiring (providing) cash
Provision for loan losses	93	955
Depreciation	2,439	2,189
Amortization of mortgage servicing rights, net of impairment recoveries	1,073	921
Amortization of core deposit and other intangible assets	536	832
Net amortization of premiums and discounts on loans and deposits	333	422
Amortization of premiums and discounts on securities	551	300
Loss on write-downs of property, plant and equipment	428	0
Change in deferred taxes	(90)	(43)
Proceeds from the sale of loans held for sale	167,687	115,877
Originations of loans held for sale	(167,380)	(111,940)
Gain from sale of loans	(4,504)	(2,680)
Gain from sale or call of securities	0	(931)
(Gain)/Loss on sale or write-down of real estate and other assets held for sale	281	(167)
Stock option expense	103	60
Restricted stock expense (benefit)	334	(101)
Income from bank owned life insurance	(658)	(1,584)
Changes in:
Accrued interest receivable	(1,105)	(1,125)
Other assets	170	(4,579)
Other liabilities	194	3,888
Net cash provided by (used in) operating activities	20,345	20,231
Investing Activities
Proceeds from maturities of held-to-maturity securities	62	63
Proceeds from maturities, calls and pay-downs of available-for-sale securities	22,215	15,293
Proceeds from sale of real estate and other assets held for sale	2,103	2,071
Proceeds from the sale of available-for-sale securities	0	14,520
Proceeds from sale of non-mortgage loans	16,178	15,556
Purchases of available-for-sale securities	(20,684)	(64,678)
Proceeds from Federal Home Loan Bank stock redemption	0	5,548
Purchase of bank-owned life insurance	(4,000)	(4,000)
Net cash paid in Insurance acquisition	$ (297)	0
Proceeds from cash surrender value of bank-owned life insurance		594
Proceeds from bank-owned life insurance death benefit		910
Purchases of portfolio mortgage loans	$ 0	(16,594)
Purchases of premises and equipment, net	(1,631)	(3,580)
Net increase in loans receivable	(103,009)	(56,654)
Net cash used in investing activities	(89,063)	(90,951)
Financing Activities
Net increase (decrease) in deposits and advance payments by borrowers	31,795	(4,818)
Repayment of Federal Home Loan Bank advances	(7,743)	(730)
Increase in Federal Home Loan Bank advances	27,000	0
Increase (decrease) in securities sold under repurchase agreements	(921)	8,170
Repayment of warrants	(11,979)	0
Proceeds from exercise of stock options	1,559	538
Proceeds from treasury stock sales	52	73
Cash dividends paid on common stock	(5,325)	(4,304)
Net cash paid for repurchase of common stock	(5,348)	(10,873)
Net cash provided by (used in) financing activities	29,090	(11,944)
Increase (decrease) in cash and cash equivalents	(39,628)	(82,664)
Cash and cash equivalents at beginning of period	112,936	179,318
Cash and cash equivalents at end of period	73,308	96,654
Supplemental cash flow information:
Interest paid	4,939	4,920
Income taxes paid	7,300	6,050
Transfers from loans to real estate and other assets held for sale	872	1,371
Transfers from property and equipment to real estate and other assets held for sale	267	0
Transfers from loans held-for-sale to loans	$ 0	$ 1,178

XML

Loans (Details 4) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	$ 25,875	$ 32,206
Recorded Investment, With no allowance		24,990	29,981
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	7,596	19,919
Recorded Investment, With an Allowance		6,681	19,064
Allowance for Loan Losses Allocated, With an Allowance		358	1,273
Residential Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	3,852	3,967
Recorded Investment, With no allowance		3,746	3,859
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	1,970	2,112
Recorded Investment, With an Allowance		1,972	2,114
Allowance for Loan Losses Allocated, With an Allowance		182	204
Residential Non Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	3,527	3,763
Recorded Investment, With no allowance		3,535	3,670
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	160	636
Recorded Investment, With an Allowance		164	638
Allowance for Loan Losses Allocated, With an Allowance		4	12
One To Four Family Residential Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	7,379	7,730
Recorded Investment, With no allowance		7,281	7,529
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	2,130	2,748
Recorded Investment, With an Allowance		2,136	2,752
Allowance for Loan Losses Allocated, With an Allowance		186	216
Multi Family Residential Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	3,287	2,627
Recorded Investment, With no allowance		3,139	2,482
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	0	0
Recorded Investment, With an Allowance		0	0
Allowance for Loan Losses Allocated, With an Allowance		0	0
Commercial Real Estate Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	4,163	7,109
Recorded Investment, With no allowance		3,821	6,481
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	3,025	2,667
Recorded Investment, With an Allowance		2,608	2,257
Allowance for Loan Losses Allocated, With an Allowance		125	148
Commercial Real Estate Non Owner Occupied [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	2,631	4,106
Recorded Investment, With no allowance		2,370	3,759
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	386	13,020
Recorded Investment, With an Allowance		310	12,606
Allowance for Loan Losses Allocated, With an Allowance		4	842
Agriculture Land [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	2,134	213
Recorded Investment, With no allowance		2,184	208
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	121	333
Recorded Investment, With an Allowance		111	320
Allowance for Loan Losses Allocated, With an Allowance		1	10
Commercial Real Estate Other Receivables [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	1,019	2,923
Recorded Investment, With no allowance		979	2,378
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	955	137
Recorded Investment, With an Allowance		531	108
Allowance for Loan Losses Allocated, With an Allowance		7	3
Commercial Real Estate [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	9,947	14,351
Recorded Investment, With no allowance		9,354	12,826
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	4,487	16,157
Recorded Investment, With an Allowance		3,560	15,291
Allowance for Loan Losses Allocated, With an Allowance		137	1,003
Construction [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	0	150
Recorded Investment, With no allowance		0	150
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	0	0
Recorded Investment, With an Allowance		0	0
Allowance for Loan Losses Allocated, With an Allowance		0	0
Commercial Working Capital [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	463	1,155
Recorded Investment, With no allowance		467	1,157
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	622	649
Recorded Investment, With an Allowance		624	650
Allowance for Loan Losses Allocated, With an Allowance		8	21
Commercial Loans Other [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	2,610	3,966
Recorded Investment, With no allowance		2,611	3,663
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	273	264
Recorded Investment, With an Allowance		277	269
Allowance for Loan Losses Allocated, With an Allowance		3	9
Commercial Loan [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	3,073	5,121
Recorded Investment, With no allowance		3,078	4,820
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	895	913
Recorded Investment, With an Allowance		901	919
Allowance for Loan Losses Allocated, With an Allowance		11	30
Home Equity and Home Improvement [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	2,135	2,192
Recorded Investment, With no allowance		2,084	2,140
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	84	101
Recorded Investment, With an Allowance		84	102
Allowance for Loan Losses Allocated, With an Allowance		24	24
Consumer Finance [Member]
Impaired loans
Unpaid Principal Balance, With no allowance	[1]	54	35
Recorded Investment, With no allowance		54	34
Allowance for Loan Losses Allocated, With no allowance		0	0
Unpaid Principal Balance, With an Allowance	[1]	0	0
Recorded Investment, With an Allowance		0	0
Allowance for Loan Losses Allocated, With an Allowance		$ 0	$ 0

[1] Presented gross of charge offs

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Fair Value (Details 3) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Impaired Loans- Applies to all loan classes, Fair Value	$ 5,200	$ 7,791
Real estate held for sale - Applies to all classes, Fair Value	351	739
Range of Input 10-30% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Impaired Loans- Applies to all loan classes, Fair Value	$ 5,200	$ 7,791
Valuation Technique, Fair Value	Appraisals which utilize sales comparison, net income and cost approach	Appraisals which utilize sales comparison, net income and cost approach
Unobservable Inputs, Fair Value	Discounts for collection issues and changes in market conditions	Discounts for collection issues and changes in market conditions
Fair Value, Range of Input, Minimum	10.00%	10.00%
Fair Value, Range of Input, Maximum	30.00%	30.00%
Fair Value Measurement Weighted Average Range	11.00%	11.00%
Range of Input 20-40% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Real estate held for sale - Applies to all classes, Fair Value		$ 739
Valuation Technique, Fair Value		Appraisals which utilize sales comparison, net income and cost approach
Unobservable Inputs, Fair Value		Discounts for changes in market conditions
Fair Value, Range of Input, Minimum		20.00%
Fair Value, Range of Input, Maximum		40.00%
Fair Value Measurement Weighted Average Range		28.00%
Range of Input 20-30% [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Real estate held for sale - Applies to all classes, Fair Value	$ 351
Valuation Technique, Fair Value	Appraisals which utilize sales comparison, net income and cost approach
Unobservable Inputs, Fair Value	Discounts for changes in market conditions
Fair Value, Range of Input, Minimum	20.00%
Fair Value, Range of Input, Maximum	30.00%
Fair Value Measurement Weighted Average Range	28.00%

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

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

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

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Numerator for basic and diluted earnings per common share – Net income	$	6,696	$	7,069	$	19,860	$	17,937
Denominator:
Denominator for basic earnings per common share – weighted average common shares, including participating securities		9,238		9,445		9,247		9,577
Effect of warrants		-		350		99		347
Effect of employee stock options and restricted share activity		84		108		84		107
Denominator for diluted earnings per common share		9,322		9,903		9,430		10,031
Basic earnings per common share	$	0.72	$	0.75	$	2.15	$	1.87
Diluted earnings per common share	$	0.72	$	0.71	$	2.11	$	1.79

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Stock Compensation Plans (Tables)

9 Months Ended

Sep. 30, 2015

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

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair value of stock options granted during the nine months ended September 30, 2015 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Nine Months ended
		September 30, 2015		September 30, 2014
Expected average risk-free rate		2.04	%	1.51	%
Expected average life		10.00 years		7.44 years
Expected volatility		42.00	%	44.62	%
Expected dividend yield		2.10	%	2.22	%

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

Following is activity under the plans during the nine months ended September 30, 2015:

Stock options	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2015		173,720	$	20.80
Forfeited or cancelled		(5,100)		25.36
Exercised		(81,800)		22.00
Granted		6,250		32.94
Options outstanding, September 30, 2015		93,070	$	20.32		3.54	$	1,512
Vested or expected to vest at September 30, 2015		93,070	$	20.32		3.54	$	1,512
Exercisable at September 30, 2015		78,420	$	18.60		2.56	$	1,409

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

There was approximately $318,000 included within other liabilities at September 30, 2015 related to the STIP.

 

	Restricted Stock Units				Stock Grants
			Weighted-Average				Weighted-Average
			Grant Date				Grant Date
Unvested Shares	Shares		Fair Value		Shares		Fair Value
Unvested at January 1, 2015		91,812	$	21.00		5,767	$	25.97
Granted		24,757		32.30		15,506		19.91
Vested		(12,846)		17.20		(12,846)		17.20
Forfeited		(29,178)		19.48		-		-
Unvested at September 30, 2015		74,545	$	25.86		8,427	$	28.19

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Investment Securities (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Proceeds	$ 0	$ 10,738	$ 0	$ 14,520
Gross realized gains	0	460	0	1,573
Gross realized losses	$ 0	$ 0	$ 0	$ (642)

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Fair Value (Details 4) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2013
Financial Assets, Carrying Value:
Cash and cash equivalents, Carrying Value	$ 73,308	$ 112,936	$ 96,654	$ 179,318
Investment securities, Carrying Value	237,177	239,634
Federal Home Loan Bank Stock, Carrying Value	13,802	13,802
Loans, net, including loans held for sale, Carrying Value	1,715,030	1,626,555
Accrued interest receivable, Carrying Value	7,142	6,037
Financial Liabilities, Carrying Value:
Deposits, Carrying Value	1,793,053	1,760,813
Advances from Federal Home Loan Bank, Carrying Value	40,801	21,544
Securities sold under repurchase agreements, Carrying Value	53,838	54,759
Subordinated debentures, Carrying Value	36,083	36,083
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	73,308	112,936
Investment securities, Fair Value	237,179	239,629
Loans, net, including loans held for sale, Fair Value	1,730,554	1,632,507
Accrued interest receivable, Fair Value	7,142	6,037
Financial Liabilities, Fair Value:
Deposits, Fair Value	1,796,922	1,762,733
Advances from Federal Home Loan Bank, Fair Value	41,155	21,772
Securities sold under repurchase agreements, Fair Value	53,838	54,759
Subordinated debentures, Fair Value	35,307	35,307
Fair Value, Inputs, Level 1 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	73,308	112,936
Investment securities, Fair Value	1,990	1,990
Loans, net, including loans held for sale, Fair Value	0	0
Accrued interest receivable, Fair Value	0	3
Financial Liabilities, Fair Value:
Deposits, Fair Value	392,103	379,552
Advances from Federal Home Loan Bank, Fair Value	0	0
Securities sold under repurchase agreements, Fair Value	0	0
Subordinated debentures, Fair Value	0	0
Fair Value, Inputs, Level 2 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	0	0
Investment securities, Fair Value	235,189	237,639
Loans, net, including loans held for sale, Fair Value	7,245	4,741
Accrued interest receivable, Fair Value	1,368	846
Financial Liabilities, Fair Value:
Deposits, Fair Value	1,404,819	1,383,181
Advances from Federal Home Loan Bank, Fair Value	41,155	21,772
Securities sold under repurchase agreements, Fair Value	53,838	54,759
Subordinated debentures, Fair Value	0	0
Fair Value, Inputs, Level 3 [Member]
Financial Assets, Fair Value:
Cash and cash equivalents, Fair Value	0	0
Investment securities, Fair Value	0	0
Loans, net, including loans held for sale, Fair Value	1,723,309	1,627,766
Accrued interest receivable, Fair Value	5,774	5,188
Financial Liabilities, Fair Value:
Deposits, Fair Value	0	0
Advances from Federal Home Loan Bank, Fair Value	0	0
Securities sold under repurchase agreements, Fair Value	0	0
Subordinated debentures, Fair Value	$ 35,307	$ 35,307

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2015

Marketable Securities [Abstract]

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

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
At September 30, 2015
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	3,000	$	3	$	-	$	3,003
Mortgage-backed securities – residential		60,713		1,338		-		62,051
REMICs		1,638		44		-		1,682
Collateralized mortgage obligations		72,391		1,561		(162)		73,790
Trust preferred securities and preferred stock		-		1		-		1
Corporate bonds		5,947		51		(16)		5,982
Obligations of state and political subdivisions		86,326		4,134		(43)		90,417
Totals	$	230,015	$	7,132	$	(221)	$	236,926

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	15	$	-	$	-	$	15
FNMA certificates		79		2		(1)		80
GNMA certificates		33		1		-		34
Obligations of state and political subdivisions		124		-		-		124
Totals	$	251	$	3	$	(1)	$	253

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
At December 31, 2014
Available-for-sale
Obligations of U.S. government corporations and agencies	$	1,000	$	-	$	(20)	$	980
Mortgage-backed securities - residential		58,380		1,476		-		59,856
REMICs		1,820		19		-		1,839
Collateralized mortgage obligations		80,252		1,280		(411)		81,121
Trust preferred stock and preferred stock		-		1		-		1
Corporate bonds		6,913		85		(6)		6,992
Obligations of state and political subdivisions		83,732		4,827		(27)		88,532
Total Available-for-Sale	$	232,097	$	7,688	$	(464)	$	239,321

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity*:
FHLMC certificates	$	26	$	-	$	(8)	$	18
FNMA certificates		93		2		-		95
GNMA certificates		39		1		-		40
Obligations of states and political subdivisions		155		-		-		155
Total Held-to-Maturity	$	313	$	3	$	(8)	$	308

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

Investments Classified by Contractual Maturity Date [Table Text Block]

These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,250	$	1,254	$	-	$	-
Due after one year through five years		15,188		15,501		124		124
Due after five years through ten years		35,329		37,188		-		-
Due after ten years		43,506		45,460		-		-
MBS/CMO		134,742		137,523		127		129
	$	230,015	$	236,926	$	251	$	253

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

The following tables summarize First Defiance’s securities that were in an unrealized loss position at September 30, 2015 and December 31, 2014: 

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At September 30, 2015
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	-	$	-	$	-	$	-	$	-
Collateralized mortgage obligations		-		-		8,574		(162)		8,574		(162)
Obligations of state and political subdivisions		5,150		(34)		424		(9)		5,574		(43)
Corporate bonds		984		(16)		-		-		984		(16)
Held to maturity securities:
FHLMC/FNMA certificates		20		(1)		9		-		29		(1)
Total temporarily impaired securities	$	6,154	$	(51)	$	9,007	$	(171)	$	15,161	$	(222)

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At December 31, 2014
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	-	$	980	$	(20)	$	980	$	(20)
Collateralized mortgage obligations		4,466		(138)		14,633		(273)		19,099		(411)
Corporate bonds		-		-		994		(6)		994		(6)
Obligations of state and political subdivisions		1,194		(8)		1,499		(19)		2,693		(27)
Held to maturity securities:
FHLMC certificates		18		(8)		-		-		18		(8)
Total temporarily impaired securities	$	5,678	$	(154)	$	18,106	$	(318)	$	23,784	$	(472)

Marketable Securities [Table Text Block]

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Proceeds	$	-	$	10,738	$	-	$	14,520
Gross realized gains		-		460		-		1,573
Gross realized losses		-		-		-		(642)

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Loans (Tables)

9 Months Ended

Sep. 30, 2015

Loans Receivable, Net [Abstract]

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

Loans receivable consist of the following:

	September 30, 2015		December 31, 2014
	(In Thousands)
Real Estate:
Secured by 1-4 family residential	$	205,370	$	206,437
Secured by multi-family residential		163,255		156,530
Secured by commercial real estate		758,952		683,958
Construction		129,230		112,385
		1,256,807		1,159,310
Other Loans:
Commercial		402,681		399,730
Home equity and improvement		113,781		111,813
Consumer Finance		15,774		15,466
		532,236		527,009
Total loans		1,789,043		1,686,319
Deduct:
Undisbursed loan funds		(54,484)		(38,653)
Net deferred loan origination fees and costs		(1,021)		(880)
Allowance for loan loss		(25,209)		(24,766)
Totals	$	1,708,329	$	1,622,020

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

The following table discloses allowance for loan loss activity for the quarter ended September 30, 2015 and 2014 by portfolio segment (In Thousands):

Quarter Ended September 30, 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	$	2,877	$	2,269	$	12,096	$	308	$	5,567	$	2,107	$	160	$	25,384
Charge-Offs		(185)		0		(64)		0		(43)		(110)		(5)		(407)
Recoveries		105		0		25		0		42		76		11		259
Provisions		(18)		(25)		96		(69)		(155)		152		(8)		(27)
Ending Allowance	$	2,779	$	2,244	$	12,153	$	239	$	5,411	$	2,225	$	158	$	25,209

Quarter Ended September 30, 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	$	2,345	$	2,480	$	11,476	$	199	$	6,199	$	1,780	$	148	$	24,627
Charge-Offs		(95)		-		(246)		-		(1,272)		(42)		(16)		(1,671)
Recoveries		13		2		978		-		109		87		16		1,205
Provisions		161		99		(1,121)		15		1,384		(134)		2		406
Ending Allowance	$	2,424	$	2,581	$	11,087	$	214	$	6,420	$	1,691	$	150	$	24,567

The following table discloses allowance for loan loss activity for the year-to-date periods ended September 30, 2015 and September 30, 2014 by portfolio segment and impairment method (In Thousands):

Year-to-date Period Ended September 30, 2015	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer		Total
Beginning Allowance	$	2,494	$	2,453	$	11,268	$	221	$	6,509	$	1,704	$	117	$	24,766
Charge-Offs		(275)		(114)		(250)		0		(68)		(340)		(21)		(1,068)
Recoveries		178		0		789		0		255		156		40		1,418
Provisions		382		(95)		346		18		(1,285)		705		22		93
Ending Allowance	$	2,779	$	2,244	$	12,153	$	239	$	5,411	$	2,225	$	158	$	25,209

Year-to-date Ended September 30, 2014	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer		Total
Beginning Allowance	$	2,847	$	2,508	$	12,000	$	134	$	5,678	$	1,635	$	148	$	24,950
Charge-Offs		(364)		-		(514)		-		(2,770)		(306)		(39)		(3,993)
Recoveries		167		7		1,901		-		358		172		50		2,655
Provisions		(226)		66		(2,300)		80		3,154		190		(9)		955
Ending Allowance	$	2,424	$	2,581	$	11,087	$	214	$	6,420	$	1,691	$	150	$	24,567

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

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 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	$	186	$	-	$	137	$	-	$	11	$	24	$	-	$	358
Collectively evaluated for impairment		2,593		2,244		12,016		239		5,400		2,201		158		24,851
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,779	$	2,244	$	12,153	$	239	$	5,411	$	2,225	$	158	$	25,209
Loans:
Loans individually evaluated for impairment	$	9,417	$	3,139	$	12,914	$	-	$	3,979	$	2,168	$	54	$	31,671
Loans collectively evaluated for impairment		196,331		160,191		748,367		74,677		400,087		112,108		15,706		1,707,467
Loans acquired with deteriorated credit quality		-		-		156		-		18		-		-		174
Total ending loans balance	$	205,748	$	163,330	$	761,437	$	74,677	$	404,084	$	114,276	$	15,760	$	1,739,312

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

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

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

	Three Months Ended September 30, 2015						Nine Months Ended September 30, 2015
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized		Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	5,750	$	67	$	66	$	5,854	$	203	$	201
Residential Non Owner Occupied		3,762		38		38		4,045		117		117
Total Residential Real Estate		9,512		105		104		9,899		320		318
Construction		-		-		-		50		2		2
Multi-Family		3,168		12		11		2,680		25		25
CRE Owner Occupied		6,475		39		39		6,566		117		117
CRE Non Owner Occupied		2,696		29		29		7,445		273		273
Agriculture Land		2,236		21		2		1,741		53		30
Other CRE		1,509		5		5		2,023		31		30
Total Commercial Real Estate		12,916		94		75		17,775		474		450
Commercial Working Capital		1,030		11		11		1,478		38		36
Commercial Other		2,989		7		6		3,483		33		41
Total Commercial		4,019		18		17		4,961		71		77
Home Equity and Home Improvement		2,160		19		19		2,257		60		60
Consumer		58		1		2		55		2		3
Total Impaired Loans	$	31,833	$	249	$	228	$	37,677	$	954	$	935

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 September 30, 2014						Nine Months Ended September 30, 2014
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized		Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,242	$	84	$	84	$	6,235	$	250	$	245
Residential Non Owner Occupied		3,537		31		31		3,778		101		101
Total Residential Real Estate		9,779		115		115		10,013		351		346
Construction		261		4		4		261		10		13
Multi-Family		349		1		1		368		3		3
CRE Owner Occupied		8,238		35		29		9,014		108		97
CRE Non Owner Occupied		18,144		200		200		18,656		605		605
Agriculture Land		536		3		2		635		11		7
Other CRE		2,576		5		5		2,075		15		16
Total Commercial Real Estate		29,494		243		236		30,381		739		725
Commercial Working Capital		3,111		9		9		3,107		20		20
Commercial Other		4,325		4		3		4,612		8		6
Total Commercial		7,436		13		12		7,719		28		26
Home Equity and Home Improvement		2,185		25		24		2,240		75		74
Consumer		47		1		1		52		3		3
Total Impaired Loans	$	49,551	$	402	$	393	$	51,034	$	1,209	$	1,190

Impaired Financing Receivables [Table Text Block]

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

	September 30, 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	$	3,852	$	3,746	$	-	$	3,967	$	3,859	$	-
Residential Non Owner Occupied		3,527		3,535		-		3,763		3,670		-
Total 1-4 Family Residential Real Estate		7,379		7,281		-		7,730		7,529		-
Multi-Family Residential Real Estate		3,287		3,139		-		2,627		2,482		-
CRE Owner Occupied		4,163		3,821		-		7,109		6,481		-
CRE Non Owner Occupied		2,631		2,370		-		4,106		3,759		-
Agriculture Land		2,134		2,184		-		213		208		-
Other CRE		1,019		979		-		2,923		2,378		-
Total Commercial Real Estate		9,947		9,354		-		14,351		12,826		-
Construction		-		-		-		150		150		-
Commercial Working Capital		463		467		-		1,155		1,157		-
Commercial Other		2,610		2,611		-		3,966		3,663		-
Total Commercial		3,073		3,078		-		5,121		4,820		-
Home Equity and Home Improvement		2,135		2,084		-		2,192		2,140		-
Consumer Finance		54		54		-		35		34		-
Total loans with no allowance recorded	$	25,875	$	24,990	$	-	$	32,206	$	29,981	$	-
With an allowance recorded:
Residential Owner Occupied	$	1,970	$	1,972	$	182	$	2,112	$	2,114	$	204
Residential Non Owner Occupied		160		164		4		636		638		12
Total 1-4 Family Residential Real Estate		2,130		2,136		186		2,748		2,752		216
Multi-Family Residential Real Estate		-		-		-		-		-		-
CRE Owner Occupied		3,025		2,608		125		2,667		2,257		148
CRE Non Owner Occupied		386		310		4		13,020		12,606		842
Agriculture Land		121		111		1		333		320		10
Other CRE		955		531		7		137		108		3
Total Commercial Real Estate		4,487		3,560		137		16,157		15,291		1,003
Construction		-		-		-		-		-		-
Commercial Working Capital		622		624		8		649		650		21
Commercial Other		273		277		3		264		269		9
Total Commercial		895		901		11		913		919		30
Home Equity and Home Improvement		84		84		24		101		102		24
Consumer Finance		-		-		-		-		-		-
Total loans with an allowance recorded	$	7,596	$	6,681	$	358	$	19,919	$	19,064	$	1,273

* Presented gross of charge offs

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

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

	September 30, 2015		December 31, 2014
	(In Thousands)
Non-accrual loans	$	16,612	$	24,130
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		16,612		24,130
Real estate and other assets held for sale		4,936		6,181
Total non-performing assets	$	21,548	$	30,311
Troubled debt restructuring, still accruing	$	13,786	$	24,686

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

The following table presents the aging of the recorded investment in past due and non accrual loans as of September 30, 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	$	139,765	$	-	$	406	$	286	$	692	$	1,422
Residential Non Owner Occupied		63,898		642		128		623		1,393		1,323
Total 1-4 Family Residential Real Estate		203,663		642		534		909		2,085		2,745
Multi-Family Residential Real Estate		161,262		-		-		2,068		2,068		2,491
CRE Owner Occupied		325,006		112		-		2,527		2,639		4,289
CRE Non Owner Occupied		291,214		121		-		357		478		1,055
Agriculture Land		96,007		190		104		-		294		838
Other Commercial Real Estate		45,484		-		-		315		315		1,414
Total Commercial Real Estate		757,711		423		104		3,199		3,726		7,596
Construction		74,604		-		73		-		73		-
Commercial Working Capital		153,408		-		-		166		166		245
Commercial Other		248,227		2		207		2,074		2,283		2,878
Total Commercial		401,635		2		207		2,240		2,449		3,123
Consumer Finance		15,671		62		9		18		89		29
Home Equity/Home Improvement		113,698		459		76		43		578		632
Total Loans	$	1,728,244	$	1,588	$	1,003	$	8,477	$	11,068	$	16,616

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 on Financing Receivables [Table Text Block]

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and nine month periods ending September 30, 2015 and September 30, 2014:

 

	Loans Modified as a TDR for the Three Months Ended September 30, 2015 ($ in thousands)				Loans Modified as a TDR for the Nine Months Ended September 30, 2015 ($ 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		0	$	-		3	$	226
1-4 Family Non Owner Occupied		0		-		4		63
CRE Owner Occupied		1		72		2		632
CRE Non Owner Occupied		0		-		2		252
Agriculture Land		0		-		3		1,552
Other CRE		0		-		0		-
Commercial Working Capital		2		114		4		119
Commercial Other		1		19		2		73
Home Equity and Improvement		4		114		11		217
Consumer Finance		2		2		6		37
Total		10	$	321		37	$	3,171

The loans described above decreased the ALLL by $3,000 in the three month period ending September 30, 2015 and $23,000 in the nine month period ending September 30, 2015.

 

	Loans Modified as a TDR for the Three Months Ended September 30, 2014 ($ In Thousands)				Loans Modified as a TDR for the Nine Months Ended September 30, 2014 ($ In Thousands)
Troubled Debt Restructurings	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Residential Owner Occupied		2	$	308		17	$	1,680
Residential Non Owner Occupied		2		361		2		361
CRE Owner Occupied		0		-		0		-
CRE Non Owner Occupied		1		135		2		493
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial working capital or other		2		24		13		1,700
Home Equity / Improvement		5		234		12		401
Consumer Finance		1		3		3		22
Total		13	$	1,065		49	$	4,657

Troubled Debt Restructurings on Payments [Table Text Block]

The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the three and nine month periods ended September 30, 2015 and September 30, 2014:

	Three Months Ended September 30, 2015 ($ in thousands)				Nine Months Ended September 30, 2015 ($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
1-4 Family Owner Occupied		0	$	-		0	$	-
1-4 Family Non Owner Occupied		0		-		1		105
CRE Owner Occupied		0		-		0		-
CRE Non Owner Occupied		0		-		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial Working Capital or Other		1		120		1		120
Commercial Other		5		1,829		5		1,829
Home Equity and Improvement		0		-		1		22
Consumer Finance		0		-		0		-
Total		6	$	1,949		8	$	2,076

The TDRs that subsequently defaulted described above had no effect on the allowance for loan losses for the three and nine month periods ended September 30, 2015.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014				2014
	($ In Thousands)				($ In Thousands)
Troubled Debt Restructurings		Number of	Recorded Investment		Number of		Recorded Investment
That Subsequently Defaulted		Loans	(as of period end)		Loans		(as of period end)
Residential Owner Occupied		1	$	80		1	$	80
Residential Non Owner Occupied		0		0		1		182
CRE Owner Occupied		4		146		4		146
CRE Non Owner Occupied		0		-		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial working capital or other		4		1,269		4		1,269
Home Equity / Improvement		0		-		0		-
Consumer Finance		0		-		0		-
Total		9	$	1,495		10	$	1,677

Financing Receivable Credit Quality Indicators [Table Text Block]

As of September 30, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		Graded		Total
1-4 Family Owner Occupied	$	5,516	$	150	$	1,970	$	-	$	132,820	$	140,456
1-4 Family Non Owner Occupied		54,283		2,088		4,394		-		4,527		65,292
Total 1-4 Family Real Estate		59,799		2,238		6,364		-		137,347		205,748
Multi-Family Residential Real Estate		159,206		208		3,798		-		118		163,330
CRE Owner Occupied		299,619		20,719		6,489		-		819		327,646
CRE Non Owner Occupied		284,404		2,900		4,371		-		17		291,692
Agriculture Land		92,750		993		2,557		-		-		96,300
Other CRE		41,836		779		2,686		-		498		45,799
Total Commercial Real Estate		718,609		25,391		16,103		-		1,334		761,437
Construction		60,624		-		-		-		14,053		74,677
Commercial Working Capital		149,408		3,350		817		-		-		153,575
Commercial Other		243,224		3,680		3,605		-		-		250,509
Total Commercial		392,632		7,030		4,422		-		-		404,084
Home Equity and Home Improvement		-		-		559		-		113,717		114,276
Consumer Finance		-		-		8		-		15,752		15,760
Total Loans	$	1,390,870	$	34,867	$	31,254	$	-	$	282,321	$	1,739,312

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):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		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

XML

Consolidated Statement of Changes in Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Shares issued under stock option plan (in shares)	67,460	35,450
Stock Based Compensation Income Tax Benefit	$ 151	$ 67
Stock Repurchased and Retired (in shares)	14,430
Restricted share activity under Stock Incentive Plans (in shares)	15,506	13,087
Shares issued direct purchases (in shares)	1,487	2,678
shares repurchased	147,039	399,288

XML

Mortgage Banking (Tables)

9 Months Ended

Sep. 30, 2015

Mortgage Banking [Abstract]

Mortgage Loans [Table Text Block]

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Gain from sale of mortgage loans	$	1,197	$	973	$	3,728	$	2,601
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		866		870		2,593		2,652
Amortization of mortgage servicing rights		(407)		(366)		(1,264)		(1,026)
Mortgage servicing rights valuation adjustments		24		68		191		105
		483		572		1,520		1,731
Net revenue from sale and servicing of mortgage loans	$	1,680	$	1,545	$	5,248	$	4,332

Capitalized Mortgage and Valuation Allowance [Table Text Block]

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	9,872	$	9,993	$	9,923	$	10,133
Loans sold, servicing retained		449		348		1,255		868
Amortization		(407)		(366)		(1,264)		(1,026)
Carrying value before valuation allowance at end of period		9,914		9,975		9,914		9,975
Valuation allowance:
Balance at beginning of period		(744)		(990)		(911)		(1,027)
Impairment recovery (charges)		24		68		191		105
Balance at end of period		(720)		(922)		(720)		(922)
Net carrying value of MSRs at end of period	$	9,194	$	9,053	$	9,194	$	9,053
Fair value of MSRs at end of period	$	9,629	$	9,933	$	9,629	$	9,933

XML

Affordable Housing Projects Tax Credit Partnership (Details) - Unfunded Commitments [Member] $ in Thousands	Sep. 30, 2015 USD ($)
Schedule of Equity Method Investments [Line Items]
2015	$ 997
2016	612
2017	160
2018	414
2019	93
Thereafter	312
Total Unfunded Commitments	$ 2,588

XML

Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Available for sale securities:
Available for sale securities, Total Fair Value	$ 236,926	$ 239,321
Obligations of U.S. Government corporations and agencies [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	3,003	980
Obligations of U.S. Government corporations and agencies [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Obligations of U.S. Government corporations and agencies [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	3,003	980
Obligations of U.S. Government corporations and agencies [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage-backed - residential [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	62,051	59,856
Mortgage-backed - residential [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage-backed - residential [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	62,051	59,856
Mortgage-backed - residential [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
REMIC [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1,682	1,839
REMIC [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
REMIC [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1,682	1,839
REMIC [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Collateralized mortgage obligations [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	73,790	81,121
Collateralized mortgage obligations [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Collateralized mortgage obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	73,790	81,121
Collateralized mortgage obligations [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Preferred Stock [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1	1
Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1	1
Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Corporate bonds [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	5,982	6,992
Corporate bonds [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	1,989	1,989
Corporate bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	3,993	5,003
Corporate bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Obligations of state and political subdivisions [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	90,417	88,532
Obligations of state and political subdivisions [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Obligations of state and political subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	90,417	88,532
Obligations of state and political subdivisions [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0
Mortgage Banking Derivative Asset [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	738	351
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	738	351
Mortgage Banking Derivative Asset [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Liability [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	100	24
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	0	0
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	100	24
Mortgage Banking Derivative Liability [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale securities:
Available for sale securities, Total Fair Value	$ 0	$ 0

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Investment Securities (Details) - USD ($) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 30, 2015	Dec. 31, 2014
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		$ 230,015	$ 232,097
Available-for-Sale Securities, Gross Unrealized Gains		7,132	7,688
Available-for-Sale Securities, Gross Unrealized Losses		(221)	(464)
Available-for-Sale Securities, Fair Value		236,926	239,321
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	[1]	251	313
Held-to-Maturity Securities, Gross Unrealized Gains	[1]	3	3
Held-to-Maturity Securities, Gross Unrealized Losses	[1]	(1)	(8)
Held-to-Maturity Securities, Fair Value	[1]	253	308
Obligations of U.S. government corporations and agencies
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		3,000	1,000
Available-for-Sale Securities, Gross Unrealized Gains		3	0
Available-for-Sale Securities, Gross Unrealized Losses		0	(20)
Available-for-Sale Securities, Fair Value		3,003	980
Mortgage-backed securities - residential
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		60,713	58,380
Available-for-Sale Securities, Gross Unrealized Gains		1,338	1,476
Available-for-Sale Securities, Gross Unrealized Losses		0	0
Available-for-Sale Securities, Fair Value		62,051	59,856
REMICs
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		1,638	1,820
Available-for-Sale Securities, Gross Unrealized Gains		44	19
Available-for-Sale Securities, Gross Unrealized Losses		0	0
Available-for-Sale Securities, Fair Value		1,682	1,839
Collateralized mortgage obligations
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		72,391	80,252
Available-for-Sale Securities, Gross Unrealized Gains		1,561	1,280
Available-for-Sale Securities, Gross Unrealized Losses		(162)	(411)
Available-for-Sale Securities, Fair Value		73,790	81,121
Trust preferred stock and preferred stock
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		0	0
Available-for-Sale Securities, Gross Unrealized Gains		1	1
Available-for-Sale Securities, Gross Unrealized Losses		0	0
Available-for-Sale Securities, Fair Value		1	1
Corporate bonds
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		5,947	6,913
Available-for-Sale Securities, Gross Unrealized Gains		51	85
Available-for-Sale Securities, Gross Unrealized Losses		(16)	(6)
Available-for-Sale Securities, Fair Value		5,982	6,992
Obligations of state and political subdivisions
Available-for-Sale Securities:
Available-for-Sale Securities, Amortized Cost		86,326	83,732
Available-for-Sale Securities, Gross Unrealized Gains		4,134	4,827
Available-for-Sale Securities, Gross Unrealized Losses		(43)	(27)
Available-for-Sale Securities, Fair Value		90,417	88,532
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	[1]	124	155
Held-to-Maturity Securities, Gross Unrealized Gains	[1]	0	0
Held-to-Maturity Securities, Gross Unrealized Losses	[1]	0	0
Held-to-Maturity Securities, Fair Value	[1]	124	155
Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member]
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	[1]	15	26
Held-to-Maturity Securities, Gross Unrealized Gains	[1]	0	0
Held-to-Maturity Securities, Gross Unrealized Losses	[1]	0	(8)
Held-to-Maturity Securities, Fair Value	[1]	15	18
Federal National Mortgage Association Certificates and Obligations (FNMA) [Member]
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	[1]	79	93
Held-to-Maturity Securities, Gross Unrealized Gains	[1]	2	2
Held-to-Maturity Securities, Gross Unrealized Losses	[1]	(1)	0
Held-to-Maturity Securities, Fair Value	[1]	80	95
Government National Mortgage Association Certificates and Obligations (GNMA) [Member]
Held-to-Maturity Securities:
Held-to-Maturity Securities, Amortized Cost	[1]	33	39
Held-to-Maturity Securities, Gross Unrealized Gains	[1]	1	1
Held-to-Maturity Securities, Gross Unrealized Losses	[1]	0	0
Held-to-Maturity Securities, Fair Value	[1]	$ 34	$ 40

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

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Deposits (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Deposits [Line Items]
Non-interest-bearing checking accounts	$ 392,103	$ 379,552
Interest-bearing checking and money market accounts	745,233	727,729
Savings deposits	216,613	203,673
Retail certificates of deposit less than $250,000	414,366	422,907
Retail certificates of deposit greater than $250,000	24,738	26,952
Deposits	$ 1,793,053	$ 1,760,813

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Consolidated Condensed Statements of Financial Condition - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Cash and cash equivalents:
Cash and amounts due from depository institutions	$ 34,308	$ 41,936
Federal funds sold	39,000	71,000
Cash and cash equivalents at beginning of year	73,308	112,936
Securities:
Available-for-sale, carried at fair value	236,926	239,321
Held-to-maturity, carried at amortized cost (fair value $253 and $308 at September 30, 2015 and December 31, 2014, respectively)	251	313
Marketable Securities, Total	237,177	239,634
Loans held for sale	6,701	4,535
Loans receivable, net of allowance of $25,209 at September 30, 2015 and $24,766 at December 31, 2014, respectively	1,708,329	1,622,020
Accrued interest receivable	7,142	6,037
Federal Home Loan Bank stock	13,802	13,802
Bank owned life insurance	51,671	47,013
Premises and equipment	38,993	40,496
Real estate and other assets held for sale	4,936	6,181
Goodwill	61,798	61,525
Core deposit and other intangibles	2,034	2,395
Mortgage servicing rights	9,194	9,012
Other assets	13,196	13,366
Total assets	2,228,281	2,178,952
Liabilities:
Deposits	1,793,053	1,760,813
Advances from the Federal Home Loan Bank	40,801	21,544
Subordinated debentures	36,083	36,083
Securities sold under repurchase agreements	53,838	54,759
Advance payments by borrowers	1,864	2,309
Deferred taxes	978	1,176
Other liabilities	23,108	22,763
Total liabilities	1,949,725	1,899,447
Stockholders' equity:
Preferred stock, $.01 par value per share: 5,000,000 shares authorized; no shares issued	0	0
Common stock, $.01 par value per share: 25,000,000 shares authorized; 12,722,469 and 12,735,313 shares issued and 9,171,948 and 9,234,534 shares outstanding, respectively	127	127
Common stock warrant	0	878
Additional paid-in capital	125,615	136,266
Accumulated other comprehensive income, net of tax of $2,106 and $2,214, respectively	3,909	4,114
Retained earnings	215,007	200,600
Treasury stock, at cost, 3,550,521 and 3,500,779 shares respectively	(66,102)	(62,480)
Total stockholders’ equity	278,556	279,505
Total liabilities and stockholders’ equity	$ 2,228,281	$ 2,178,952

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Fair Value (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Impaired Financing Receivable, Recorded Investment	$ 5,200,000		$ 5,200,000		$ 7,791,000
Impaired Financing Receivables, Provisional Expenses	59,000	$ 1,400,000	659,000	$ 2,900,000
Mortgage Servicing Rights at Fair Value	874,000		874,000		1,034,000
Valuation Allowance of Mortgage Servicing Rights	720,000		720,000		911,000
Proceeds from Collection of Loans Receivable	24,000	68,000	191,000	105,000
Real Estate Held-for-sale, Increase (Decrease) in Fair Value	19,000	$ 53,000	724,000	$ 126,000
Impaired Financing Receivable, Related Allowance	358,000		$ 358,000		1,273,000
Minimum [Member] | Real Estate held for sale [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Fair Value Inputs, Discount Rate			0.00%
Maximum [Member] | Real Estate held for sale [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Fair Value Inputs, Discount Rate			30.00%
Collateral dependent loans [Member]
Fair Value, Option, Qualitative Disclosures Related to Election [Line Items]
Impaired Financing Receivable, Recorded Investment	5,200,000		$ 5,200,000		7,800,000
Impaired Financing Receivable, Related Allowance	$ 13,000,000		$ 13,000,000		$ 19,000,000

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Consolidated Condensed Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Condensed Statement of Income Captions [Line Items]
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax	$ 0	$ 138	$ 0	$ 279

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Loans (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	$ 25,384	$ 24,627	$ 24,766	$ 24,950
Charge-Offs	(407)	(1,671)	(1,068)	(3,993)
Recoveries	259	1,205	1,418	2,655
Provisions	(27)	406	93	955
Ending Allowance	25,209	24,567	25,209	24,567
One to Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,877	2,345	2,494	2,847
Charge-Offs	(185)	(95)	(275)	(364)
Recoveries	105	13	178	167
Provisions	(18)	161	382	(226)
Ending Allowance	2,779	2,424	2,779	2,424
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,269	2,480	2,453	2,508
Charge-Offs	0	0	(114)	0
Recoveries	0	2	0	7
Provisions	(25)	99	(95)	66
Ending Allowance	2,244	2,581	2,244	2,581
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	12,096	11,476	11,268	12,000
Charge-Offs	(64)	(246)	(250)	(514)
Recoveries	25	978	789	1,901
Provisions	96	(1,121)	346	(2,300)
Ending Allowance	12,153	11,087	12,153	11,087
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	308	199	221	134
Charge-Offs	0	0	0	0
Recoveries	0	0	0	0
Provisions	(69)	15	18	80
Ending Allowance	239	214	239	214
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	5,567	6,199	6,509	5,678
Charge-Offs	(43)	(1,272)	(68)	(2,770)
Recoveries	42	109	255	358
Provisions	(155)	1,384	(1,285)	3,154
Ending Allowance	5,411	6,420	5,411	6,420
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	2,107	1,780	1,704	1,635
Charge-Offs	(110)	(42)	(340)	(306)
Recoveries	76	87	156	172
Provisions	152	(134)	705	190
Ending Allowance	2,225	1,691	2,225	1,691
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Beginning Allowance	160	148	117	148
Charge-Offs	(5)	(16)	(21)	(39)
Recoveries	11	16	40	50
Provisions	(8)	2	22	(9)
Ending Allowance	$ 158	$ 150	$ 158	$ 150

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Commitments, Guarantees and Contingent Liabilities (Tables)

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Schedule of Line of Credit Facilities [Table Text Block]

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

	September 30, 2015				December 31, 2014
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,383	$	82,986	$	37,546	$	69,232
Unused lines of credit		22,767		299,208		20,385		307,449
Standby letters of credit		-		19,799		-		17,886
Total	$	63,150	$	401,993	$	57,931	$	394,567

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Loans (Details 7) - TDRs [Member] $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) Numbers	Sep. 30, 2014 USD ($) Numbers	Sep. 30, 2015 USD ($) Numbers	Sep. 30, 2014 USD ($) Numbers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	10	13	37	49
Troubled Debt Restructurings, Recorded Investment | $	$ 321	$ 1,065	$ 3,171	$ 4,657
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans		2		17
Troubled Debt Restructurings, Recorded Investment | $		$ 308		$ 1,680
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans		2		2
Troubled Debt Restructurings, Recorded Investment | $		$ 361		$ 361
1-4 Family Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0		3
Troubled Debt Restructurings, Recorded Investment | $	$ 0		$ 226
1-4 Family Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0		4
Troubled Debt Restructurings, Recorded Investment | $	$ 0		$ 63
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	1	0	2	0
Troubled Debt Restructurings, Recorded Investment | $	$ 72	$ 0	$ 632	$ 0
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0	1	2	2
Troubled Debt Restructurings, Recorded Investment | $	$ 0	$ 135	$ 252	$ 493
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0	0	3	0
Troubled Debt Restructurings, Recorded Investment | $	$ 0	$ 0	$ 1,552	$ 0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	0	0	0	0
Troubled Debt Restructurings, Recorded Investment | $	$ 0	$ 0	$ 0	$ 0
Commercial Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	1		2
Troubled Debt Restructurings, Recorded Investment | $	$ 19		$ 73
Other Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	2	2	4	13
Troubled Debt Restructurings, Recorded Investment | $	$ 114	$ 24	$ 119	$ 1,700
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	4	5	11	12
Troubled Debt Restructurings, Recorded Investment | $	$ 114	$ 234	$ 217	$ 401
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings, Number of Loans	2	1	6	3
Troubled Debt Restructurings, Recorded Investment | $	$ 2	$ 3	$ 37	$ 22

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Income Taxes

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

13. Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Indiana. The Company is no longer subject to examination by taxing authorities for years before 2010. The Company currently operates primarily in the states of Ohio and Michigan, which tax financial institutions based on their equity rather than their income.

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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

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

September 30, 2015

December 31, 2014

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking

Derivatives

$

738

$

(100 )

$

638

$

351

$

(24 )

$

327

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

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	(94)	$	(27)	$	311	$	151

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Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2015

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

Other Comprehensive Income Loss [Text Block]

Note 15 - Other Comprehensive Income (Loss)

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

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
	(In Thousands)
Three months ended September 30, 2015:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	2,024	$	709	$	1,315
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive Income (loss)	$	2,024	$	709	$	1,315
Nine months ended September 30, 2015:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	(313)	$	(108)	$	(205)
Reclassification adjustment for net gains included in net income		-		-		-
Total other comprehensive loss	$	(313)	$	(108)	$	(205)

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
Three months ended September 30, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	707	$	225	$	482
Reclassification adjustment for net gains included in net income		(460)		(138)		(322)
Total other comprehensive income (loss)	$	247	$	87	$	160

	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
Nine months ended September 30, 2014:
Securities available for sale and transferred securities:
Change in net unrealized gain (loss) during the period	$	5,172	$	1,764	$	3,408
Reclassification adjustment for net gains included in net income		(931)		(279)		(652)
Total other comprehensive Income (loss)	$	4,241	$	1,485	$	2,756

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

					Accumulated
	Securities		Post-		Other
	Available		retirement		Comprehensive
	For Sale		Benefit		Income
	(In Thousands)
Balance January 1, 2015	$	4,697	$	(583)	$	4,114
Other comprehensive income (loss) before reclassifications		(205)		-		(205)
Amounts reclassified from accumulated other comprehensive income		-		-		-
Net other comprehensive income during period		(205)		-		(205)
Balance September 30, 2015	$	4,492	$	(583)	$	3,909
Balance January 1, 2014	$	906	$	(361)	$	545
Other comprehensive income (loss) before reclassifications		3,408		-		3,408
Amounts reclassified from accumulated other comprehensive income		(652)		-		(652)
Net other comprehensive income during period		2,756		-		2,756
Balance September 30, 2014	$	3,662	$	(361)	$	3,301

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Loans (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses, Period Increase (Increase)	$ 3,000	$ 60,000	$ 23,000	$ 55,000
Loans and Leases Receivable, Consumer, Loans in Process	140,000		140,000
Troubled Debt Restructuring [Member]
Financing Receivable, Modifications, Recorded Investment	20,500,000		20,500,000		$ 33,000,000
Specified Reserves, Provision for Troubled Debt Restructurings	256,000		256,000		1,100,000
Loans and Leases Receivable, Impaired, Commitment to Lend	$ 81,000		81,000		$ 69,000
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down			$ 6,800,000
Troubled Debt Restructuring [Member] | Subsequently Defaulted [Member]
Financing Receivable, Allowance for Credit Losses, Period Increase (Increase)		$ 15,000		$ 15,000

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Consolidated Statement of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Common Stock Warrant [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Treasury Stock [Member]
Balance at Dec. 31, 2013	$ 272,147	$ 0	$ 127	$ 878	$ 136,403	$ 545	$ 182,290	$ (48,096)
Net income	17,937						17,937
Other comprehensive income (loss)	2,756					2,756
Stock option expense	60				60
Shares issued under stock option plan	538				15		(46)	569
Restricted share activity under stock incentive plans	(101)				(313)			212
Shares issued from direct purchases	73				29			44
shares repurchased	(10,873)							(10,873)
Common stock dividends declared	(4,304)						(4,304)
Balance at Sep. 30, 2014	278,233	0	127	878	136,194	3,301	195,877	(58,144)
Balance at Dec. 31, 2014	279,505	0	127	878	136,266	4,114	200,600	(62,480)
Net income	19,860						19,860
Other comprehensive income (loss)	(205)					(205)
Stock option expense	103				103
Warrant repurchase	(11,979)			(878)	(11,101)
Shares issued under stock option plan	1,559				443		(313)	1,429
Restricted share activity under stock incentive plans	334				(121)		185	270
Shares issued from direct purchases	52				25			27
shares repurchased	(5,348)							(5,348)
Common stock dividends declared	(5,325)						(5,325)
Balance at Sep. 30, 2015	$ 278,556	$ 0	$ 127	$ 0	$ 125,615	$ 3,909	$ 215,007	$ (66,102)

XML

Consolidated Condensed Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Held-to-maturity, fair value (in dollars)	[1]	$ 253	$ 308
Loans receivable, allowance (in dollars)		$ 25,209	$ 24,766
Preferred stock, par value (in dollars per share)		$ 0.01	$ 0.01
Preferred stock, shares authorized		5,000,000	5,000,000
Preferred stock, shares issued		0	0
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01
Common stock, shares authorized		25,000,000	25,000,000
Common stock, shares issued		12,722,469	12,735,313
Common stock, shares outstanding		9,171,948	9,234,534
Accumulated other comprehensive income, tax effect (in dollars)		$ 2,106	$ 2,214
Treasury stock, shares		3,550,521	3,500,779

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

XML

Loans

9 Months Ended

Sep. 30, 2015

Loans Receivable, Net [Abstract]

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

8. Loans

 

Loans receivable consist of the following:

	September 30, 2015		December 31, 2014
	(In Thousands)
Real Estate:
Secured by 1-4 family residential	$	205,370	$	206,437
Secured by multi-family residential		163,255		156,530
Secured by commercial real estate		758,952		683,958
Construction		129,230		112,385
		1,256,807		1,159,310
Other Loans:
Commercial		402,681		399,730
Home equity and improvement		113,781		111,813
Consumer Finance		15,774		15,466
		532,236		527,009
Total loans		1,789,043		1,686,319
Deduct:
Undisbursed loan funds		(54,484)		(38,653)
Net deferred loan origination fees and costs		(1,021)		(880)
Allowance for loan loss		(25,209)		(24,766)
Totals	$	1,708,329	$	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 September 30, 2015 and 2014 by portfolio segment (In Thousands):

Quarter Ended September 30, 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	$	2,877	$	2,269	$	12,096	$	308	$	5,567	$	2,107	$	160	$	25,384
Charge-Offs		(185)		0		(64)		0		(43)		(110)		(5)		(407)
Recoveries		105		0		25		0		42		76		11		259
Provisions		(18)		(25)		96		(69)		(155)		152		(8)		(27)
Ending Allowance	$	2,779	$	2,244	$	12,153	$	239	$	5,411	$	2,225	$	158	$	25,209

Quarter Ended September 30, 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	$	2,345	$	2,480	$	11,476	$	199	$	6,199	$	1,780	$	148	$	24,627
Charge-Offs		(95)		-		(246)		-		(1,272)		(42)		(16)		(1,671)
Recoveries		13		2		978		-		109		87		16		1,205
Provisions		161		99		(1,121)		15		1,384		(134)		2		406
Ending Allowance	$	2,424	$	2,581	$	11,087	$	214	$	6,420	$	1,691	$	150	$	24,567

The following table discloses allowance for loan loss activity for the year-to-date periods ended September 30, 2015 and September 30, 2014 by portfolio segment and impairment method (In Thousands):

Year-to-date Period Ended September 30, 2015	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer		Total
Beginning Allowance	$	2,494	$	2,453	$	11,268	$	221	$	6,509	$	1,704	$	117	$	24,766
Charge-Offs		(275)		(114)		(250)		0		(68)		(340)		(21)		(1,068)
Recoveries		178		0		789		0		255		156		40		1,418
Provisions		382		(95)		346		18		(1,285)		705		22		93
Ending Allowance	$	2,779	$	2,244	$	12,153	$	239	$	5,411	$	2,225	$	158	$	25,209

Year-to-date Ended September 30, 2014	1-4 Family Residential Real Estate		Multi- Family Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer		Total
Beginning Allowance	$	2,847	$	2,508	$	12,000	$	134	$	5,678	$	1,635	$	148	$	24,950
Charge-Offs		(364)		-		(514)		-		(2,770)		(306)		(39)		(3,993)
Recoveries		167		7		1,901		-		358		172		50		2,655
Provisions		(226)		66		(2,300)		80		3,154		190		(9)		955
Ending Allowance	$	2,424	$	2,581	$	11,087	$	214	$	6,420	$	1,691	$	150	$	24,567

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 September 30, 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	$	186	$	-	$	137	$	-	$	11	$	24	$	-	$	358
Collectively evaluated for impairment		2,593		2,244		12,016		239		5,400		2,201		158		24,851
Acquired with deteriorated credit quality		-		-		-		-		-		-		-		-
Total ending allowance balance	$	2,779	$	2,244	$	12,153	$	239	$	5,411	$	2,225	$	158	$	25,209
Loans:
Loans individually evaluated for impairment	$	9,417	$	3,139	$	12,914	$	-	$	3,979	$	2,168	$	54	$	31,671
Loans collectively evaluated for impairment		196,331		160,191		748,367		74,677		400,087		112,108		15,706		1,707,467
Loans acquired with deteriorated credit quality		-		-		156		-		18		-		-		174
Total ending loans balance	$	205,748	$	163,330	$	761,437	$	74,677	$	404,084	$	114,276	$	15,760	$	1,739,312

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 September 30, 2015						Nine Months Ended September 30, 2015
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized		Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	5,750	$	67	$	66	$	5,854	$	203	$	201
Residential Non Owner Occupied		3,762		38		38		4,045		117		117
Total Residential Real Estate		9,512		105		104		9,899		320		318
Construction		-		-		-		50		2		2
Multi-Family		3,168		12		11		2,680		25		25
CRE Owner Occupied		6,475		39		39		6,566		117		117
CRE Non Owner Occupied		2,696		29		29		7,445		273		273
Agriculture Land		2,236		21		2		1,741		53		30
Other CRE		1,509		5		5		2,023		31		30
Total Commercial Real Estate		12,916		94		75		17,775		474		450
Commercial Working Capital		1,030		11		11		1,478		38		36
Commercial Other		2,989		7		6		3,483		33		41
Total Commercial		4,019		18		17		4,961		71		77
Home Equity and Home Improvement		2,160		19		19		2,257		60		60
Consumer		58		1		2		55		2		3
Total Impaired Loans	$	31,833	$	249	$	228	$	37,677	$	954	$	935

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 September 30, 2014						Nine Months Ended September 30, 2014
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized		Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	6,242	$	84	$	84	$	6,235	$	250	$	245
Residential Non Owner Occupied		3,537		31		31		3,778		101		101
Total Residential Real Estate		9,779		115		115		10,013		351		346
Construction		261		4		4		261		10		13
Multi-Family		349		1		1		368		3		3
CRE Owner Occupied		8,238		35		29		9,014		108		97
CRE Non Owner Occupied		18,144		200		200		18,656		605		605
Agriculture Land		536		3		2		635		11		7
Other CRE		2,576		5		5		2,075		15		16
Total Commercial Real Estate		29,494		243		236		30,381		739		725
Commercial Working Capital		3,111		9		9		3,107		20		20
Commercial Other		4,325		4		3		4,612		8		6
Total Commercial		7,436		13		12		7,719		28		26
Home Equity and Home Improvement		2,185		25		24		2,240		75		74
Consumer		47		1		1		52		3		3
Total Impaired Loans	$	49,551	$	402	$	393	$	51,034	$	1,209	$	1,190

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

	September 30, 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	$	3,852	$	3,746	$	-	$	3,967	$	3,859	$	-
Residential Non Owner Occupied		3,527		3,535		-		3,763		3,670		-
Total 1-4 Family Residential Real Estate		7,379		7,281		-		7,730		7,529		-
Multi-Family Residential Real Estate		3,287		3,139		-		2,627		2,482		-
CRE Owner Occupied		4,163		3,821		-		7,109		6,481		-
CRE Non Owner Occupied		2,631		2,370		-		4,106		3,759		-
Agriculture Land		2,134		2,184		-		213		208		-
Other CRE		1,019		979		-		2,923		2,378		-
Total Commercial Real Estate		9,947		9,354		-		14,351		12,826		-
Construction		-		-		-		150		150		-
Commercial Working Capital		463		467		-		1,155		1,157		-
Commercial Other		2,610		2,611		-		3,966		3,663		-
Total Commercial		3,073		3,078		-		5,121		4,820		-
Home Equity and Home Improvement		2,135		2,084		-		2,192		2,140		-
Consumer Finance		54		54		-		35		34		-
Total loans with no allowance recorded	$	25,875	$	24,990	$	-	$	32,206	$	29,981	$	-
With an allowance recorded:
Residential Owner Occupied	$	1,970	$	1,972	$	182	$	2,112	$	2,114	$	204
Residential Non Owner Occupied		160		164		4		636		638		12
Total 1-4 Family Residential Real Estate		2,130		2,136		186		2,748		2,752		216
Multi-Family Residential Real Estate		-		-		-		-		-		-
CRE Owner Occupied		3,025		2,608		125		2,667		2,257		148
CRE Non Owner Occupied		386		310		4		13,020		12,606		842
Agriculture Land		121		111		1		333		320		10
Other CRE		955		531		7		137		108		3
Total Commercial Real Estate		4,487		3,560		137		16,157		15,291		1,003
Construction		-		-		-		-		-		-
Commercial Working Capital		622		624		8		649		650		21
Commercial Other		273		277		3		264		269		9
Total Commercial		895		901		11		913		919		30
Home Equity and Home Improvement		84		84		24		101		102		24
Consumer Finance		-		-		-		-		-		-
Total loans with an allowance recorded	$	7,596	$	6,681	$	358	$	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: 

	September 30, 2015		December 31, 2014
	(In Thousands)
Non-accrual loans	$	16,612	$	24,130
Loans over 90 days past due and still accruing		-		-
Total non-performing loans		16,612		24,130
Real estate and other assets held for sale		4,936		6,181
Total non-performing assets	$	21,548	$	30,311
Troubled debt restructuring, still accruing	$	13,786	$	24,686

The following table presents the aging of the recorded investment in past due and non accrual loans as of September 30, 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	$	139,765	$	-	$	406	$	286	$	692	$	1,422
Residential Non Owner Occupied		63,898		642		128		623		1,393		1,323
Total 1-4 Family Residential Real Estate		203,663		642		534		909		2,085		2,745
Multi-Family Residential Real Estate		161,262		-		-		2,068		2,068		2,491
CRE Owner Occupied		325,006		112		-		2,527		2,639		4,289
CRE Non Owner Occupied		291,214		121		-		357		478		1,055
Agriculture Land		96,007		190		104		-		294		838
Other Commercial Real Estate		45,484		-		-		315		315		1,414
Total Commercial Real Estate		757,711		423		104		3,199		3,726		7,596
Construction		74,604		-		73		-		73		-
Commercial Working Capital		153,408		-		-		166		166		245
Commercial Other		248,227		2		207		2,074		2,283		2,878
Total Commercial		401,635		2		207		2,240		2,449		3,123
Consumer Finance		15,671		62		9		18		89		29
Home Equity/Home Improvement		113,698		459		76		43		578		632
Total Loans	$	1,728,244	$	1,588	$	1,003	$	8,477	$	11,068	$	16,616

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 September 30, 2015 and December 31, 2014, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of $20.5 million and $33.0 million, respectively. The Company allocated $256,000 and $1.1 million of specific reserves to those loans at September 30, 2015 and December 31, 2014, and has committed to lend additional amounts totaling up to $81,000 and $69,000 at September 30, 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, $6.8 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 and nine month periods ending September 30, 2015 and September 30, 2014:

 

	Loans Modified as a TDR for the Three Months Ended September 30, 2015 ($ in thousands)				Loans Modified as a TDR for the Nine Months Ended September 30, 2015 ($ 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		0	$	-		3	$	226
1-4 Family Non Owner Occupied		0		-		4		63
CRE Owner Occupied		1		72		2		632
CRE Non Owner Occupied		0		-		2		252
Agriculture Land		0		-		3		1,552
Other CRE		0		-		0		-
Commercial Working Capital		2		114		4		119
Commercial Other		1		19		2		73
Home Equity and Improvement		4		114		11		217
Consumer Finance		2		2		6		37
Total		10	$	321		37	$	3,171

The loans described above decreased the ALLL by $3,000 in the three month period ending September 30, 2015 and $23,000 in the nine month period ending September 30, 2015.

 

	Loans Modified as a TDR for the Three Months Ended September 30, 2014 ($ In Thousands)				Loans Modified as a TDR for the Nine Months Ended September 30, 2014 ($ In Thousands)
Troubled Debt Restructurings	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Residential Owner Occupied		2	$	308		17	$	1,680
Residential Non Owner Occupied		2		361		2		361
CRE Owner Occupied		0		-		0		-
CRE Non Owner Occupied		1		135		2		493
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial working capital or other		2		24		13		1,700
Home Equity / Improvement		5		234		12		401
Consumer Finance		1		3		3		22
Total		13	$	1,065		49	$	4,657

The loans described above increased the allowance for loan loss by $60,000 in the three month period ending September 30, 2014 and increased the allowance for loan loss by $55,000 in the nine month period ending September 30, 2014.

 

Of the 2015 modifications, 13 were made TDRs due to the fact that the borrower has been in bankruptcy, 1 was made TDR due to extending the amortization, 1 was made a TDR due to an interest only period, 1 was made a TDR due to extending the maturity, 11 were made TDRs due to advancing funds to a watchlist credit, 3 was to term out a line of credit and 7 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 three and nine month periods ended September 30, 2015 and September 30, 2014:

	Three Months Ended September 30, 2015 ($ in thousands)				Nine Months Ended September 30, 2015 ($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
1-4 Family Owner Occupied		0	$	-		0	$	-
1-4 Family Non Owner Occupied		0		-		1		105
CRE Owner Occupied		0		-		0		-
CRE Non Owner Occupied		0		-		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial Working Capital or Other		1		120		1		120
Commercial Other		5		1,829		5		1,829
Home Equity and Improvement		0		-		1		22
Consumer Finance		0		-		0		-
Total		6	$	1,949		8	$	2,076

The TDRs that subsequently defaulted described above had no effect on the allowance for loan losses for the three and nine month periods ended September 30, 2015.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014				2014
	($ In Thousands)				($ In Thousands)
Troubled Debt Restructurings		Number of	Recorded Investment		Number of		Recorded Investment
That Subsequently Defaulted		Loans	(as of period end)		Loans		(as of period end)
Residential Owner Occupied		1	$	80		1	$	80
Residential Non Owner Occupied		0		0		1		182
CRE Owner Occupied		4		146		4		146
CRE Non Owner Occupied		0		-		0		-
Agriculture Land		0		-		0		-
Other CRE		0		-		0		-
Commercial working capital or other		4		1,269		4		1,269
Home Equity / Improvement		0		-		0		-
Consumer Finance		0		-		0		-
Total		9	$	1,495		10	$	1,677

The TDRs that subsequently defaulted described above decreased the allowance for loan losses by $15,000 for the three and nine month periods ended September 30, 2014.

The terms of certain other loans were modified during the period ending September 30, 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 59 loans were modified under this definition during the three month period ended September 30, 2015 and a total of 212 loans were modified under this definition during the nine month period ended September 30, 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 September 30, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		Graded		Total
1-4 Family Owner Occupied	$	5,516	$	150	$	1,970	$	-	$	132,820	$	140,456
1-4 Family Non Owner Occupied		54,283		2,088		4,394		-		4,527		65,292
Total 1-4 Family Real Estate		59,799		2,238		6,364		-		137,347		205,748
Multi-Family Residential Real Estate		159,206		208		3,798		-		118		163,330
CRE Owner Occupied		299,619		20,719		6,489		-		819		327,646
CRE Non Owner Occupied		284,404		2,900		4,371		-		17		291,692
Agriculture Land		92,750		993		2,557		-		-		96,300
Other CRE		41,836		779		2,686		-		498		45,799
Total Commercial Real Estate		718,609		25,391		16,103		-		1,334		761,437
Construction		60,624		-		-		-		14,053		74,677
Commercial Working Capital		149,408		3,350		817		-		-		153,575
Commercial Other		243,224		3,680		3,605		-		-		250,509
Total Commercial		392,632		7,030		4,422		-		-		404,084
Home Equity and Home Improvement		-		-		559		-		113,717		114,276
Consumer Finance		-		-		8		-		15,752		15,760
Total Loans	$	1,390,870	$	34,867	$	31,254	$	-	$	282,321	$	1,739,312

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):

			Special						Not
Class	Pass		Mention		Substandard		Doubtful		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 $140,000 as of September 30, 2015.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 30, 2015
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Registrant Name	FIRST DEFIANCE FINANCIAL CORP
Entity Central Index Key	0000946647
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	FDEF
Entity Common Stock, Shares Outstanding		9,172,657

XML

Mortgage Banking

9 Months Ended

Sep. 30, 2015

Mortgage Banking [Abstract]

Mortgage Banking [Text Block]

9. Mortgage Banking

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Gain from sale of mortgage loans	$	1,197	$	973	$	3,728	$	2,601
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		866		870		2,593		2,652
Amortization of mortgage servicing rights		(407)		(366)		(1,264)		(1,026)
Mortgage servicing rights valuation adjustments		24		68		191		105
		483		572		1,520		1,731
Net revenue from sale and servicing of mortgage loans	$	1,680	$	1,545	$	5,248	$	4,332

The unpaid principal balance of residential mortgage loans serviced for third parties was $1.35 billion at September 30, 2015 and December 31, 2014.

 

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	9,872	$	9,993	$	9,923	$	10,133
Loans sold, servicing retained		449		348		1,255		868
Amortization		(407)		(366)		(1,264)		(1,026)
Carrying value before valuation allowance at end of period		9,914		9,975		9,914		9,975
Valuation allowance:
Balance at beginning of period		(744)		(990)		(911)		(1,027)
Impairment recovery (charges)		24		68		191		105
Balance at end of period		(720)		(922)		(720)		(922)
Net carrying value of MSRs at end of period	$	9,194	$	9,053	$	9,194	$	9,053
Fair value of MSRs at end of period	$	9,629	$	9,933	$	9,629	$	9,933

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

The Company established an accrual for secondary market buy-back losses that resulted in a reversal of $84,000 for the first nine months of 2015 mainly due to no actual losses being recorded in 2015. In the first nine months of 2014, the Company accrued $276,000 which was partially offset by reversing $67,000 of accrued expenses related to the Freddie Mac post-foreclosure review that began in the third quarter of 2013 and was reversed in 2014 with no losses resulting.

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Derivative Financial Instruments (Details Textual) - USD ($) $ in Millions	Sep. 30, 2015	Dec. 31, 2014
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Derivative Instruments Not Designated as Hedging Instruments at Fair Value, Net	$ 17.9	$ 7.4
Notional Amount of Interest Rate Derivative Instruments Not Designated as Hedging Instruments	$ 24.1	$ 11.6

XML

Consolidated Condensed Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Interest Income
Loans	$ 18,419	$ 17,365	$ 54,445	$ 50,894
Investment securities:
Taxable	880	933	2,712	2,560
Non-taxable	796	787	2,377	2,295
Interest-bearing deposits	33	64	113	283
FHLB stock dividends	138	137	413	502
Total interest income	20,266	19,286	60,060	56,534
Interest Expense
Deposits	1,363	1,304	3,947	3,989
FHLB advances and other	178	131	461	397
Subordinated debentures	154	147	451	439
Notes payable	38	41	113	121
Total interest expense	1,733	1,623	4,972	4,946
Net interest income	18,533	17,663	55,088	51,588
Provision for loan losses	(27)	406	93	955
Net interest income after provision for loan losses	18,560	17,257	54,995	50,633
Non-interest Income
Service fees and other charges	2,799	2,660	8,018	7,492
Insurance commissions	2,310	2,366	7,793	7,640
Mortgage banking income	1,680	1,545	5,248	4,332
Gain on sale of non-mortgage loans	543	40	776	79
Gain on sale or call of securities	0	460	0	931
Trust income	370	315	1,095	895
Income from Bank Owned Life Insurance	238	1,130	658	1,584
Other non-interest income	42	840	485	1,346
Total non-interest income	7,982	9,356	24,073	24,299
Non-interest Expense
Compensation and benefits	9,791	9,287	27,896	26,468
Occupancy	1,788	1,613	5,361	4,905
FDIC insurance premium	329	350	999	1,088
Financial institutions tax	447	515	1,340	1,524
Data processing	1,531	1,489	4,652	4,333
Amortization of intangibles	157	269	536	832
Other non-interest expense	2,805	3,248	9,758	10,639
Total non-interest expense	16,848	16,771	50,542	49,789
Income before income taxes	9,694	9,842	28,526	25,143
Federal income taxes	2,998	2,773	8,666	7,206
Net Income	$ 6,696	$ 7,069	$ 19,860	$ 17,937
Earnings per common share (Note 6)
Basic (in dollars per share)	$ 0.72	$ 0.75	$ 2.15	$ 1.87
Diluted (in dollars per share)	0.72	0.71	2.11	1.79
Dividends declared per share (Note 5) (in dollars per share)	$ 0.2	$ 0.15	$ 0.575	$ 0.45
Average common shares outstanding (Note 6)
Basic (in shares)	9,238	9,445	9,247	9,577
Diluted (in shares)	9,322	9,903	9,430	10,031

XML

Fair Value

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

3. Fair Value

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

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

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

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

 

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

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

Available for sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 1 include federal agency preferred stock securities and one corporate bond. Securities in Level 2 include U.S. Government agencies, mortgage-backed securities, corporate bonds and municipal securities.

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

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

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal.  Appraisal values are generally discounted from 0% to 30% to account for other factors that may impact the value of collateral. In determining the value of impaired collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include:  discounts for collection issues and/or changes in market conditions.

 

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

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

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

Assets and Liabilities Measured on a Recurring Basis

September 30, 2015	Level 1 Inputs		Level 2  Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	3,003	$	-	$	3,003
Mortgage-backed - residential		-		62,051		-		62,051
REMICs		-		1,682		-		1,682
Collateralized mortgage obligations		-		73,790		-		73,790
Preferred stock		1		-		-		1
Corporate bonds		1,989		3,993		-		5,982
Obligations of state and political subdivisions		-		90,417		-		90,417
Mortgage banking derivative - asset		-		738		-		738
Mortgage banking derivative - liability		-		100		-		100

December 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	-	$	980	$	-	$	980
Mortgage-backed - residential		-		59,856		-		59,856
REMICs		-		1,839		-		1,839
Collateralized mortgage obligations		-		81,121		-		81,121
Preferred stock		1		-		-		1
Corporate bonds		1,989		5,003		-		6,992
Obligations of state and political subdivisions		-		88,532		-		88,532
Mortgage banking derivative - asset		-		351		-		351
Mortgage banking derivative - liability		-		24		-		24

There were no assets measured at fair value on a recurring basis using Level 3 inputs for the nine months ended September 30, 2015.

The table below presents a reconciliation and income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2014:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2014	$	582
Total gains or (losses) (realized/unrealized)
Included in earnings (realized)		(329)
Included in other comprehensive income (presented gross of taxes)		993
Amortization		-
Sales		(1,246)
Transfers in and/or out of Level 3		-
Ending balance, September 30, 2014	$	-

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)  (In Thousands)
Beginning balance, July 1, 2014	$	-
Total gains or (losses) (realized/unrealized)
Included in earnings (realized)		-
Included in other comprehensive income (presented gross of taxes)		-
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, September 30, 2014	$	-

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

Assets and Liabilities Measured on a Non-Recurring Basis

September 30, 2015	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	278	$	278
Multi Family Residential		-		-		102		102
Commercial Real Estate		-		-		4,726		4,726
Commercial loans		-		-		-		-
Home Equity and Improvement		-		-		94		94
Total Impaired loans		-		-		5,200		5,200
Mortgage servicing rights		-		874		-		874
Real estate held for sale
Residential		-		-		66		66
CRE		-		-		285		285
Total real estate held for sale		-		-		351		351

December 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	419	$	419
Multi Family Residential		-		-		269		269
Commercial Real Estate		-		-		6,665		6,665
Commercial		-		-		340		340
Home Equity and Improvement		-		-		98		98
Total impaired loans		-		-		7,791		7,791
Mortgage servicing rights		-		1,034		-		1,034
Real estate held for sale
Residential		-		-		-		-
CRE		-		-		739		739
Total real estate held for sale		-		-		739		739

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2015, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair  Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
				(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	5,200	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10-30	%		11	%
Real estate held for sale – Applies to all classes	$	351	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		20-30	%		28	%

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

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
				(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	7,791	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10-30	%		11	%
Real estate held for sale – Applies to all classes	$	739	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		20-40	%		28	%

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a fair value of $5.2 million, with a $13,000 valuation allowance and a fair value of $7.8 million, with a $19,000 valuation allowance at September 30, 2015 and December 31, 2014, respectively. A provision expense of $59,000 and a provision recovery of $659,000 for the three months and nine months ended September 30, 2015 and a provision expense of $1.4 million and $2.9 million for the three and nine months ended September 30, 2014 was included in earnings.

Mortgage servicing rights which are carried at the lower of cost or fair value had a fair value of $874,000 with a valuation allowance of $720,000 and a fair value of $1.0 million with a valuation allowance of $911,000 at September 30, 2015 and December 31, 2014, respectively. A recovery of $24,000 and $191,000 for the three and nine months ended September 30, 2015 and a recovery of $68,000 and $105,000 for the three and nine months ended September 30, 2014, respectively, were included in earnings.

Real estate held for sale is determined using Level 3 inputs which include appraisals and are adjusted for estimated costs to sell. The change in fair value of real estate held for sale and fixed assets transferred to real estate held for sale was $19,000 and $724,000 for the three and nine months ended September 30, 2015, which was recorded directly as an adjustment to current earnings through non-interest expense. The change in fair value of real estate held for sale was $53,000 and $126,000 for the three and nine months ended September 30, 2014.

 

In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of September 30, 2015 and December 31, 2014. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of First Defiance.

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

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

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

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

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

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

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

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at September 30, 2015.

			Fair Value Measurements at September 30, 2015 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	73,308	$	73,308	$	73,308	$	-	$	-
Investment securities		237,177		237,179		1,990		235,189		-
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,715,030		1,730,554		-		7,245		1,723,309
Accrued interest receivable		7,142		7,142		-		1,368		5,774
Financial Liabilities:
Deposits	$	1,793,053	$	1,796,922	$	392,103	$	1,404,819	$	-
Advances from Federal Home Loan Bank		40,801		41,155		-		41,155		-
Securities sold under repurchase agreements		53,838		53,838		-		53,838		-
Subordinated debentures		36,083		35,307		-		-		35,307

			Fair Value Measurements at December 31, 2014 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	112,936	$	112,936	$	112,936	$	-	$	-
Investment securities		239,634		239,629		1,990		237,639		-
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,626,555		1,632,507		-		4,741		1,627,766
Accrued interest receivable		6,037		6,037		3		846		5,188
Financial Liabilities:
Deposits	$	1,760,813	$	1,762,733	$	379,552	$	1,383,181	$	-
Advances from Federal Home Loan Bank		21,544		21,772		-		21,772		-
Securities sold under repurchase agreements		54,759		54,759		-		54,759		-
Subordinated debentures		36,083		35,307		-		-		35,307

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Allowance for Loan Losses

Beginning June 30, 2015, the Company refined the methodology to its allowance for loan loss calculation pertaining to the general reserve component for non-impaired loans. There was no change to the calculation of the component for reserves on impaired loans. Within the general reserve, the determination of the historical loss component was modified from using a three-year average annual loss rate to a loss migration measurement. The loss migration measurement implemented June 30, 2015, utilizes an average of four (4) four-year loss migration periods for each loan portfolio segment with differentiation between loan risk grades. This approach provides for a more precise reflection of probable incurred losses by risk grade within each loan portfolio segment over an average loan life cycle. Management believes that capturing the risk grade changes and cumulative losses over the life cycle of a loan more accurately depicts management’s estimate of historical losses as well as being more reflective of the ongoing risks in the loan portfolio, thereby requiring less weight to the subjective components of the allowance for loan losses. Prior to June 30, 2015, the approach to this component quantified the historical loss by calculating a rolling twelve quarter average annual loss rate for each portfolio segment, without differentiation between loan risk grades. This modification resulted in a change of the general reserves between the loan portfolio segments but did not have a material impact on the overall allowance for loan losses.

Earnings Per Common Share

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

Newly Issued Accounting Standards

Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 was originally going to be effective for the Company on January 1, 2017; however, the FASB recently issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date" which deferred the effective date of ASU 2014-09 by one year to January 1, 2018. The Company is currently evaluating the potential impact of ASU 2014-09 on its Consolidated Financial Statements.

In June 2014, the FASB issued ASU No. 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The amendments in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The amendments in the ASU also require expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The Company adopted the amendments in this ASU effective January 1, 2015. In addition, the expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings were effective for the Company’s reporting period ending June 30, 2015. All of the Company's repurchase agreements are typical in nature (i.e., not repurchase-to-maturity transactions or repurchase agreements executed as a repurchase financing) and are accounted for as secured borrowings. As such, the adoption of ASU No. 2014-11 did not have a material impact on the Company's Consolidated Financial Statements.

In January 2014, the FASB issued ASU No. 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." ASU 2014-01 applies to all reporting entities that invest in qualified affordable housing projects through limited liability entities. The pronouncement permits reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. The pronouncement also requires disclosure that enables users of its financial statements to understand the nature of these investments. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The pronouncement should be applied retrospectively for all periods presented, effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption was permitted. The Company early adopted ASU 2014-01 in January 2014 and such adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of the amendments in ASU 2014-04 to Topic 310, “Receivables - Troubled Debt Restructurings by Creditors,” is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. An entity can elect to adopt the amendments using either a modified retrospective transition method or a prospective transition method. Early adoption was permitted. The Company adopted ASU 2014-04 on January 1, 2015 and such adoption did not have a material impact on the Company’s Consolidated Financial Statements.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

14. Derivative Financial Instruments

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. First Federal had approximately $17.9 million and $7.4 million of interest rate lock commitments at September 30, 2015 and December 31, 2014, respectively. There were $24.1 million and $11.6 million of forward commitments for the future delivery of residential mortgage loans at September 30, 2015 and December 31, 2014, respectively.

 

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

September 30, 2015

December 31, 2014

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking

Derivatives

$

738

$

(100 )

$

638

$

351

$

(24 )

$

327

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	(94)	$	(27)	$	311	$	151

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

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Deposits

9 Months Ended

Sep. 30, 2015

Deposits [Abstract]

Deposit Liabilities Disclosures [Text Block]

10. Deposits

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

	September 30, 2015		December 31, 2014
	(In Thousands)
Non-interest-bearing checking accounts	$	392,103	$	379,552
Interest-bearing checking and money market accounts		745,233		727,729
Savings deposits		216,613		203,673
Retail certificates of deposit less than $250,000		414,366		422,907
Retail certificates of deposit greater than $250,000		24,738		26,952
	$	1,793,053	$	1,760,813

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Affordable Housing Projects Tax Credit Partnership (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Proportional Amortization Method
Tax credits and other tax benefits recognized	$ 118	$ 65	$ 354	$ 397
Amortization expense in federal income taxes	$ 89	$ 48	$ 268	$ 296

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

6. Earnings Per Common Share

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

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Numerator for basic and diluted earnings per common share – Net income	$	6,696	$	7,069	$	19,860	$	17,937
Denominator:
Denominator for basic earnings per common share – weighted average common shares, including participating securities		9,238		9,445		9,247		9,577
Effect of warrants		-		350		99		347
Effect of employee stock options and restricted share activity		84		108		84		107
Denominator for diluted earnings per common share		9,322		9,903		9,430		10,031
Basic earnings per common share	$	0.72	$	0.75	$	2.15	$	1.87
Diluted earnings per common share	$	0.72	$	0.71	$	2.11	$	1.79

There were 6,250 and 16,750 shares under option granted to employees excluded from the diluted earnings per common share calculation as they were anti-dilutive for the three and nine months ended September 30, 2015, respectively. There were 10,500 and 43,000 shares under options granted to employees excluded from the diluted earnings per common share calculation as they were anti-dilutive for the three and nine months ended September 30, 2014, respectively.

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Loans (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$ 358	$ 1,273
Collectively evaluated for impairment	24,851	23,493
Total ending allowance balance	25,209	24,766
Loans:
Loans individually evaluated for impairment	31,671	49,045
Loans collectively evaluated for impairment	1,707,467	1,602,736
Loans acquired with deteriorated credit quality	174	186
Total ending loans balance	1,739,312	1,651,967
Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	0	0
One to Four Family Residential Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	186	216
Collectively evaluated for impairment	2,593	2,278
Total ending allowance balance	2,779	2,494
Loans:
Loans individually evaluated for impairment	9,417	10,281
Loans collectively evaluated for impairment	196,331	196,582
Loans acquired with deteriorated credit quality	0	1
Total ending loans balance	205,748	206,864
One to Four Family Residential Real Estate [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	0	0
Multi Family Residential Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	2,244	2,453
Total ending allowance balance	2,244	2,453
Loans:
Loans individually evaluated for impairment	3,139	2,482
Loans collectively evaluated for impairment	160,191	154,178
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	163,330	156,660
Multi Family Residential Real Estate [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	0	0
Commercial Real Estate [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	137	1,003
Collectively evaluated for impairment	12,016	10,265
Total ending allowance balance	12,153	11,268
Loans:
Loans individually evaluated for impairment	12,914	28,117
Loans collectively evaluated for impairment	748,367	657,677
Loans acquired with deteriorated credit quality	156	163
Total ending loans balance	761,437	685,957
Commercial Real Estate [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	0	0
Construction Loans [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	239	221
Total ending allowance balance	239	221
Loans:
Loans individually evaluated for impairment	0	150
Loans collectively evaluated for impairment	74,677	73,572
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	74,677	73,722
Construction Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	0	0
Commercial Loan [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	11	30
Collectively evaluated for impairment	5,400	6,479
Total ending allowance balance	5,411	6,509
Loans:
Loans individually evaluated for impairment	3,979	5,739
Loans collectively evaluated for impairment	400,087	395,270
Loans acquired with deteriorated credit quality	18	22
Total ending loans balance	404,084	401,031
Commercial Loan [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	0	0
Home Equity and Home Improvement [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	24	24
Collectively evaluated for impairment	2,201	1,680
Total ending allowance balance	2,225	1,704
Loans:
Loans individually evaluated for impairment	2,168	2,242
Loans collectively evaluated for impairment	112,108	110,040
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	114,276	112,282
Home Equity and Home Improvement [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	0	0
Consumer Finance [Member]
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	158	117
Total ending allowance balance	158	117
Loans:
Loans individually evaluated for impairment	54	34
Loans collectively evaluated for impairment	15,706	15,417
Loans acquired with deteriorated credit quality	0	0
Total ending loans balance	15,760	15,451
Consumer Finance [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Ending allowance balance attributable to loans:
Total ending allowance balance	$ 0	$ 0

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Stock Compensation Plans

9 Months Ended

Sep. 30, 2015

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

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

4. Stock Compensation Plans

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

As of September 30, 2015, 93,070 options are outstanding at option prices based on the market value of the underlying shares on the date the options were granted. Options granted under all plans vest 20% per year except for the 2009 grant to the Company’s executive officers, which vested 40% in 2011 and then 20% annually. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.

In 2014, the Company approved a 2014 Short-Term (“STIP”) Equity Incentive Plan and a 2014 Long-Term (“LTIP”) Equity Incentive Plan for selected members of management.

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

 

Under the 2014 LTIP, the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 30,538 RSU’s to the participants in the 2014 LTIP effective January 1, 2014, which represents the maximum target award. The amount of benefit under the 2014 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2016. The awards will vest at the end of the performance period ending December 31, 2016. The benefits earned under the 2014 LTIP will be paid out in equity in the first quarter of 2017. The participants are required to be employed on the day of payout in order to receive such payment.

In 2015, the Company approved a 2015 STIP and a 2015 LTIP for selected members of management.

Under the 2015 STIP, the participants may earn up to 30% to 45% of their salary for potential payout based on the achievement of certain corporate performance targets during the calendar year. The final amount of benefits under the 2015 STIP will be determined as of December 31, 2015 and will be paid out in cash in the first quarter of 2016. The participants are required to be employed on the day of payout in order to receive such payment.

Under the 2015 LTIP, the participants may earn up to 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 24,757 RSU’s to the participants in the 2015 LTIP effective January 1, 2015, which represents the maximum target award. The amount of benefit under the 2015 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2017. The awards will vest at the end of the performance period ending December 31, 2017. The benefits earned under the 2015 LTIP will be paid out in equity in the first quarter of 2018. The participants are required to be employed on the day of payout in order to receive such payment.

In the nine months ended September 30, 2015, the Company granted 2,660 restricted shares. 2,160 shares were issued to directors and have a one-year vesting period. 500 shares were issued to an employee with a 3 year vesting period.

 

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

The fair value of stock options granted during the nine months ended September 30, 2015 was determined at the date of grant using the Black-Scholes stock option-pricing model and the following assumptions:

	Nine Months ended
		September 30, 2015		September 30, 2014
Expected average risk-free rate		2.04	%	1.51	%
Expected average life		10.00 years		7.44 years
Expected volatility		42.00	%	44.62	%
Expected dividend yield		2.10	%	2.22	%

The weighted-average fair value of options granted was $13.13 for the nine months ended September 30, 2015 and $10.79 for the nine months ended September 30, 2014.

 

Following is activity under the plans during the nine months ended September 30, 2015:

Stock options	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2015		173,720	$	20.80
Forfeited or cancelled		(5,100)		25.36
Exercised		(81,800)		22.00
Granted		6,250		32.94
Options outstanding, September 30, 2015		93,070	$	20.32		3.54	$	1,512
Vested or expected to vest at September 30, 2015		93,070	$	20.32		3.54	$	1,512
Exercisable at September 30, 2015		78,420	$	18.60		2.56	$	1,409

As of September 30, 2015, there was $147,000 of total unrecognized compensation costs related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 3.81 years. 

At September 30, 2015, 74,545 RSU’s and 8,427 stock grants were outstanding. Compensation expense is recognized over the performance period based on the achievements of targets as established with the plan documents. A total expense of $730,000 was recorded during the nine months ended September 30, 2015 compared to an expense of $389,000 for the same period in 2014. The lower expense in the first nine months of 2014 was due to accrual reversals primarily from the 2013 LTIP adjusting for the actual payout in year one and two as well as adjusting the estimated payout in year three. There was approximately $318,000 included within other liabilities at September 30, 2015 related to the STIP.

 

	Restricted Stock Units				Stock Grants
			Weighted-Average				Weighted-Average
			Grant Date				Grant Date
Unvested Shares	Shares		Fair Value		Shares		Fair Value
Unvested at January 1, 2015		91,812	$	21.00		5,767	$	25.97
Granted		24,757		32.30		15,506		19.91
Vested		(12,846)		17.20		(12,846)		17.20
Forfeited		(29,178)		19.48		-		-
Unvested at September 30, 2015		74,545	$	25.86		8,427	$	28.19

The maximum amount of compensation expense that may be recorded for the 2015 STIP and the 2013, 2014 and 2015 LTIPs at September 30, 2015 is approximately $2.7 million. However, the estimated expense expected to be recorded as of September 30, 2015 based on the performance measures in the plan, is $1.7 million of which $740,000 is unrecognized at September 30, 2015 and will be recognized over the remaining performance periods.

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Dividends on Common Stock

9 Months Ended

Sep. 30, 2015

Dividends, Common Stock [Abstract]

Dividend on Common Stock [Text Block]

5. Dividends on Common Stock

First Defiance declared and paid a $0.175 common stock dividend in the first quarter and a $0.20 per common stock dividend in the second and third quarters of 2015. First Defiance declared and paid a $0.15 per common stock dividend in the first, second and third quarters of 2014.

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Investment Securities

9 Months Ended

Sep. 30, 2015

Marketable Securities [Abstract]

Investment [Text Block]

7. Investment Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
At September 30, 2015
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	3,000	$	3	$	-	$	3,003
Mortgage-backed securities – residential		60,713		1,338		-		62,051
REMICs		1,638		44		-		1,682
Collateralized mortgage obligations		72,391		1,561		(162)		73,790
Trust preferred securities and preferred stock		-		1		-		1
Corporate bonds		5,947		51		(16)		5,982
Obligations of state and political subdivisions		86,326		4,134		(43)		90,417
Totals	$	230,015	$	7,132	$	(221)	$	236,926

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity Securities*:
FHLMC certificates	$	15	$	-	$	-	$	15
FNMA certificates		79		2		(1)		80
GNMA certificates		33		1		-		34
Obligations of state and political subdivisions		124		-		-		124
Totals	$	251	$	3	$	(1)	$	253

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
At December 31, 2014
Available-for-sale
Obligations of U.S. government corporations and agencies	$	1,000	$	-	$	(20)	$	980
Mortgage-backed securities - residential		58,380		1,476		-		59,856
REMICs		1,820		19		-		1,839
Collateralized mortgage obligations		80,252		1,280		(411)		81,121
Trust preferred stock and preferred stock		-		1		-		1
Corporate bonds		6,913		85		(6)		6,992
Obligations of state and political subdivisions		83,732		4,827		(27)		88,532
Total Available-for-Sale	$	232,097	$	7,688	$	(464)	$	239,321

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-Maturity*:
FHLMC certificates	$	26	$	-	$	(8)	$	18
FNMA certificates		93		2		-		95
GNMA certificates		39		1		-		40
Obligations of states and political subdivisions		155		-		-		155
Total Held-to-Maturity	$	313	$	3	$	(8)	$	308

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

The amortized cost and fair value of the investment securities portfolio at September 30, 2015 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”) and REMICs, which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Due in one year or less	$	1,250	$	1,254	$	-	$	-
Due after one year through five years		15,188		15,501		124		124
Due after five years through ten years		35,329		37,188		-		-
Due after ten years		43,506		45,460		-		-
MBS/CMO		134,742		137,523		127		129
	$	230,015	$	236,926	$	251	$	253

Investment securities with a carrying amount of $134.3 million at September 30, 2015 were pledged as collateral on public deposits, securities sold under repurchase agreements and Federal Reserve discount window.

 

As of September 30, 2015, the Company’s investment portfolio consisted of 367 securities, 28 of which were in an unrealized loss position.

 

The following tables summarize First Defiance’s securities that were in an unrealized loss position at September 30, 2015 and December 31, 2014: 

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At September 30, 2015
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	-	$	-	$	-	$	-	$	-
Collateralized mortgage obligations		-		-		8,574		(162)		8,574		(162)
Obligations of state and political subdivisions		5,150		(34)		424		(9)		5,574		(43)
Corporate bonds		984		(16)		-		-		984		(16)
Held to maturity securities:
FHLMC/FNMA certificates		20		(1)		9		-		29		(1)
Total temporarily impaired securities	$	6,154	$	(51)	$	9,007	$	(171)	$	15,161	$	(222)

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loses
	(In Thousands)
At December 31, 2014
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	-	$	980	$	(20)	$	980	$	(20)
Collateralized mortgage obligations		4,466		(138)		14,633		(273)		19,099		(411)
Corporate bonds		-		-		994		(6)		994		(6)
Obligations of state and political subdivisions		1,194		(8)		1,499		(19)		2,693		(27)
Held to maturity securities:
FHLMC certificates		18		(8)		-		-		18		(8)
Total temporarily impaired securities	$	5,678	$	(154)	$	18,106	$	(318)	$	23,784	$	(472)

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

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

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

In the three or nine months ended September 30, 2015 and September 30, 2014, management determined there was no OTTI.

The Company holds three CDO’s at September 30, 2015 and December 31, 2014 with a zero value.

The amount of OTTI recognized in accumulated other comprehensive income (“AOCI”) was zero at September 30, 2015 and December 31, 2014.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Proceeds	$	-	$	10,738	$	-	$	14,520
Gross realized gains		-		460		-		1,573
Gross realized losses		-		-		-		(642)

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Loans (Details 6) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	$ 1,728,244	$ 1,639,185
Total Past Due	11,068	12,782
Total Non Accrual	16,616	24,135
Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,588	2,204
Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,003	3,247
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	8,477	7,331
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	139,765	141,597
Total Past Due	692	1,483
Total Non Accrual	1,422	1,702
Residential Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	39
Residential Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	406	1,079
Residential Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	286	365
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	63,898	62,991
Total Past Due	1,393	793
Total Non Accrual	1,323	1,625
Residential Non Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	642	110
Residential Non Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	128	105
Residential Non Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	623	578
One To Four Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	203,663	204,588
Total Past Due	2,085	2,276
Total Non Accrual	2,745	3,327
One To Four Family Residential Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	642	149
One To Four Family Residential Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	534	1,184
One To Four Family Residential Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	909	943
Multi Family Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	161,262	156,413
Total Past Due	2,068	247
Total Non Accrual	2,491	2,546
Multi Family Residential Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	247
Multi Family Residential Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Multi Family Residential Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,068	0
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	325,006	299,500
Total Past Due	2,639	3,482
Total Non Accrual	4,289	7,004
Commercial Real Estate Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	112	163
Commercial Real Estate Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	1,566
Commercial Real Estate Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,527	1,753
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	291,214	243,341
Total Past Due	478	1,843
Total Non Accrual	1,055	2,582
Commercial Real Estate Non Owner Occupied [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	121	119
Commercial Real Estate Non Owner Occupied [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	416
Commercial Real Estate Non Owner Occupied [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	357	1,308
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	96,007	93,529
Total Past Due	294	14
Total Non Accrual	838	686
Agriculture Land [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	190	0
Agriculture Land [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	104	14
Agriculture Land [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	45,484	43,835
Total Past Due	315	413
Total Non Accrual	1,414	2,359
Commercial Real Estate Other Receivable [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	155
Commercial Real Estate Other Receivable [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Real Estate Other Receivable [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	315	258
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	757,711	680,205
Total Past Due	3,726	5,752
Total Non Accrual	7,596	12,631
Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	423	437
Commercial Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	104	1,996
Commercial Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	3,199	3,319
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	74,604	73,722
Total Past Due	73	0
Total Non Accrual	0	0
Construction [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Construction [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	73	0
Construction [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	153,408	135,009
Total Past Due	166	951
Total Non Accrual	245	1,103
Commercial Working Capital [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Working Capital [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Working Capital [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	166	951
Commercial Loans Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	248,227	262,982
Total Past Due	2,283	2,089
Total Non Accrual	2,878	3,897
Commercial Loans Other [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2	67
Commercial Loans Other [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	207	10
Commercial Loans Other [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,074	2,012
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	401,635	397,991
Total Past Due	2,449	3,040
Total Non Accrual	3,123	5,000
Commercial Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2	67
Commercial Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	207	10
Commercial Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,240	2,963
Consumer Finance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	15,671	15,326
Total Past Due	89	125
Total Non Accrual	29	12
Consumer Finance [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	62	68
Consumer Finance [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	9	57
Consumer Finance [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	18	0
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	113,698	110,940
Total Past Due	578	1,342
Total Non Accrual	632	619
Home Equity and Home Improvement [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	459	1,236
Home Equity and Home Improvement [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	76	0
Home Equity and Home Improvement [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 43	$ 106

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Affordable Housing Projects Tax Credit Partnership (Details Textual) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Other Assets [Member]
Investments in Affordable Housing Projects [Abstract]
Amortization Method Qualified Affordable Housing Project Investments	$ 4,400	$ 4,600
Unfunded Commitments [Member]
Investments in Affordable Housing Projects [Abstract]
Qualified Affordable Housing Project Investments, Commitment	2,588
Unfunded Commitments [Member] | Other Liabilities [Member]
Investments in Affordable Housing Projects [Abstract]
Qualified Affordable Housing Project Investments, Commitment	$ 2,600	$ 3,000

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Loans (Details 8) - Subsequently Defaulted [Member] $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) Numbers	Sep. 30, 2014 USD ($) Numbers	Sep. 30, 2015 USD ($) Numbers	Sep. 30, 2014 USD ($) Numbers
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	6	9	8	10
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 1,949	$ 1,495	$ 2,076	$ 1,677
Residential Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans		1		1
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $		$ 80		$ 80
Residential Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans		0		1
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $		$ 0		$ 182
1-4 Family Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0		0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0		$ 0
1-4 Family Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0		1
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0		$ 105
Commercial Real Estate Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	4	0	4
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0	$ 146	$ 0	$ 146
Commercial Real Estate Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0	$ 0	$ 0	$ 0
Agriculture Land [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0	$ 0	$ 0	$ 0
Commercial Real Estate Other Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0	$ 0	$ 0	$ 0
Commercial Working Capital [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	1	4	1	4
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 120	$ 1,269	$ 120	$ 1,269
Commercial Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	5		5
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 1,829		$ 1,829
Home Equity and Home Improvement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0	1	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0	$ 0	$ 22	$ 0
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled Debt Restructurings That Subsequently Defaulted, Number of Loans	0	0	0	0
Troubled Debt Restructurings That Subsequently Defaulted, Recorded Investment | $	$ 0	$ 0	$ 0	$ 0

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Loans (Details 5) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 16,612	$ 24,130
Loans over 90 days past due and still accruing	0	0
Total non-performing loans	16,612	24,130
Real estate and other assets held for sale	4,936	6,181
Total non-performing assets	21,548	30,311
Troubled debt restructuring, still accruing	$ 13,786	$ 24,686

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2015

Subordinated Borrowings [Abstract]

Federal Home Loan Bank Advances Disclosure [Table Text Block]

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

	September 30, 2015		December 31, 2014
	(In Thousands)
FHLB Advances:
Single maturity fixed rate advances	$	27,000	$	-
Putable advances		5,000		12,000
Amortizable mortgage advances		8,801		9,544
Total	$	40,801	$	21,544
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

Schedule of Underlying Assets of Repurchase Agreements when Amount of Repurchase Agreements Exceeds 10 Percent of Assets [Table Text Block]

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2015 and December 31, 2014 is presented in the following tables.

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
At September 30, 2015			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	19,618	$	-	$	-	$	-	$	19,618
Collateralized mortgage obligations		34,220		-		-		-		34,220
Total borrowings	$	53,838	$	-	$	-	$	-	$	53,838
Gross amount of recognized liabilities for repurchase agreements									$	53,838

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
At December 31, 2014			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	16,570	$	-	$	-	$	-	$	16,570
Collateralized mortgage obligations		38,189		-		-		-		38,189
Total borrowings	$	54,759	$	-	$	-	$	-	$	54,759
Gross amount of recognized liabilities for repurchase agreements									$	54,759

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Numerator for basic and diluted earnings per common share - Net income	$ 6,696	$ 7,069	$ 19,860	$ 17,937
Denominator:
Denominator for basic earnings per common share - weighted average common shares, including participating securities	9,238	9,445	9,247	9,577
Effect of warrants	0	350	99	347
Effect of employee stock options and restricted share activity	84	108	84	107
Denominator for diluted earnings per common share	9,322	9,903	9,430	10,031
Basic earnings per common share	$ 0.72	$ 0.75	$ 2.15	$ 1.87
Diluted earnings per common share	$ 0.72	$ 0.71	$ 2.11	$ 1.79

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Commitments, Guarantees and Contingent Liabilities

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments Contingencies and Guarantees [Text Block]

12. Commitments, Guarantees and Contingent Liabilities

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

Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory and equipment) is obtained based on Management’s credit assessment of the customer.

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

	September 30, 2015				December 31, 2014
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	40,383	$	82,986	$	37,546	$	69,232
Unused lines of credit		22,767		299,208		20,385		307,449
Standby letters of credit		-		19,799		-		17,886
Total	$	63,150	$	401,993	$	57,931	$	394,567

Commitments to make loans are generally made for periods of 60 days or less. In addition to the above commitments, First Defiance had commitments to sell $24.1 million and $11.6 million of loans to Freddie Mac, Fannie Mae, Federal Home Loan Bank of Cincinnati or BB&T Mortgage at September 30, 2015 and December 31, 2014, respectively.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Allowance for Loan Losses

Beginning June 30, 2015, the Company refined the methodology to its allowance for loan loss calculation pertaining to the general reserve component for non-impaired loans. There was no change to the calculation of the component for reserves on impaired loans. Within the general reserve, the determination of the historical loss component was modified from using a three-year average annual loss rate to a loss migration measurement. The loss migration measurement implemented June 30, 2015, utilizes an average of four (4) four-year loss migration periods for each loan portfolio segment with differentiation between loan risk grades. This approach provides for a more precise reflection of probable incurred losses by risk grade within each loan portfolio segment over an average loan life cycle. Management believes that capturing the risk grade changes and cumulative losses over the life cycle of a loan more accurately depicts management’s estimate of historical losses as well as being more reflective of the ongoing risks in the loan portfolio, thereby requiring less weight to the subjective components of the allowance for loan losses. Prior to June 30, 2015, the approach to this component quantified the historical loss by calculating a rolling twelve quarter average annual loss rate for each portfolio segment, without differentiation between loan risk grades. This modification resulted in a change of the general reserves between the loan portfolio segments but did not have a material impact on the overall allowance for loan losses.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share

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

New Accounting Pronouncements, Policy [Policy Text Block]

Newly Issued Accounting Standards

Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 was originally going to be effective for the Company on January 1, 2017; however, the FASB recently issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date" which deferred the effective date of ASU 2014-09 by one year to January 1, 2018. The Company is currently evaluating the potential impact of ASU 2014-09 on its Consolidated Financial Statements.

In June 2014, the FASB issued ASU No. 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The amendments in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The amendments in the ASU also require expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The Company adopted the amendments in this ASU effective January 1, 2015. In addition, the expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings were effective for the Company’s reporting period ending June 30, 2015. All of the Company's repurchase agreements are typical in nature (i.e., not repurchase-to-maturity transactions or repurchase agreements executed as a repurchase financing) and are accounted for as secured borrowings. As such, the adoption of ASU No. 2014-11 did not have a material impact on the Company's Consolidated Financial Statements.

In January 2014, the FASB issued ASU No. 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." ASU 2014-01 applies to all reporting entities that invest in qualified affordable housing projects through limited liability entities. The pronouncement permits reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. The pronouncement also requires disclosure that enables users of its financial statements to understand the nature of these investments. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The pronouncement should be applied retrospectively for all periods presented, effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption was permitted. The Company early adopted ASU 2014-01 in January 2014 and such adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of the amendments in ASU 2014-04 to Topic 310, “Receivables - Troubled Debt Restructurings by Creditors,” is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. An entity can elect to adopt the amendments using either a modified retrospective transition method or a prospective transition method. Early adoption was permitted. The Company adopted ASU 2014-04 on January 1, 2015 and such adoption did not have a material impact on the Company’s Consolidated Financial Statements.

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Stock Compensation Plans (Details Textual) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	93,070		173,720
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options	$ 147,000
Employee Service Share Based Compensation Nonvested Awards, Total Compensation Cost Not Yet Recognized, Period For Recognition (in years)	3 years 9 months 22 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	8,427
Allocated Share-based Compensation Expense	$ 730,000	$ 389,000
Compensation Expense, Maximum	2,700,000
Estimated Compensation Expense, Excepted	1,700,000
Unrecognized Compensation Expense	$ 740,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 13.13	$ 10.79
Restricted Stock Units (Rsus) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	2,660
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	74,545
Director [Member] | Restricted Stock Units (Rsus) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	2,160
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Employee [Member] | Restricted Stock Units (Rsus) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	500
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Equity Plan 2010 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	350,000
Short-term and Long-term Equity Incentive Plan 2011 [Member]
Allocated Share-based Compensation Expense	$ 318,000
Stock Option Grant, 2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Vested Percentage, Year	20.00%
Stock Option Grant, 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Vested Percentage, Year	40.00%
Stock Option Grant, Annual [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Vested Percentage, Year	20.00%
Short Term Equity Incentive Plan 2014 [Member]
Option Subscription, Description	The final amount of benefits under the 2014 STIP were determined as of December 31, 2014 and paid out in cash in the first quarter of 2015.
Short Term Equity Incentive Plan 2014 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	45.00%
Short Term Equity Incentive Plan 2014 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	30.00%
Long Term Equity Incentive Plan 2014 [Member]
Option Subscription, Description	The amount of benefit under the 2014 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2016. The awards will vest at the end of the performance period ending December 31, 2016. The benefits earned under the 2014 LTIP will be paid out in equity in the first quarter of 2017. The participants are required to be employed on the day of payout in order to receive such payment.
Long Term Equity Incentive Plan 2014 [Member] | Restricted Stock Units (Rsus) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			30,538
Long Term Equity Incentive Plan 2014 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	45.00%
Long Term Equity Incentive Plan 2014 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	20.00%
Long Term Equity Incentive Plan 2015 [Member]
Option Subscription, Description	The amount of benefit under the 2015 LTIP will be determined individually at the end of the 36 month performance period ending December 31, 2017. The awards will vest at the end of the performance period ending December 31, 2017. The benefits earned under the 2015 LTIP will be paid out in equity in the first quarter of 2018. The participants are required to be employed on the day of payout in order to receive such payment.
Long Term Equity Incentive Plan 2015 [Member] | Restricted Stock Units (Rsus) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	24,757
Long Term Equity Incentive Plan 2015 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	45.00%
Long Term Equity Incentive Plan 2015 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	20.00%
Short Term Equity Incentive Plan 2015 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	45.00%
Short Term Equity Incentive Plan 2015 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	30.00%

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Fair Value (Details 1) - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance	$ 0	$ 582
Total gains or (losses) (realized/unrealized)
Included in earnings (realized)	0	(329)
Included in other comprehensive income (presented gross of taxes)	0	993
Amortization	0	0
Sales	0	(1,246)
Transfers in and/or out of Level 3	0	0
Ending balance	$ 0	$ 0

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Consolidated Condensed Statements of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Net income		$ 6,696	$ 7,069	$ 19,860	$ 17,937
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale		2,024	707	(313)	5,172
Reclassification adjustment for security gains (losses) included in net income(1)	[1]	0	(460)	0	(931)
Income tax benefit (expense)		(709)	(87)	108	(1,485)
Other comprehensive income (loss)		1,315	160	(205)	2,756
Comprehensive income		$ 8,011	$ 7,229	$ 19,655	$ 20,693

[1] Amounts are included in gains on sale or call of securities on the Consolidated Condensed Statements of Income. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the three months ended September 30, 2015 and 2014 was $0 and $138, respectively. Income tax expense associated with the reclassification adjustments, included in federal income taxes, for the nine months ended September 30, 2015 and 2014 was $0 and $279, respectively.

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Basis of Presentation

9 Months Ended

Sep. 30, 2015

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

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

1. Basis of Presentation

First Defiance Financial Corp. (“First Defiance” or the “Company”) is a unitary thrift holding company that conducts business through its three wholly owned subsidiaries, First Federal Bank of the Midwest (“First Federal”), First Insurance Group of the Midwest, Inc. (“First Insurance”), and First Defiance Risk Management Inc. (“First Defiance Risk Management”). All significant intercompany transactions and balances are eliminated in consolidation.

First Federal is primarily engaged in attracting deposits from the general public through its offices and using those and other available sources of funds to originate loans primarily in the counties in which its offices are located. First Federal’s traditional banking activities include originating and servicing residential, non-residential real estate, commercial, home improvement and home equity and consumer loans and providing a broad range of depository, trust and wealth management services. First Insurance is an insurance agency that does business in the Defiance, Bryan, Bowling Green, Maumee, Oregon and Lima, Ohio areas, offering property and casualty, group health and life insurance products. On September 1, 2015, First Insurance acquired a group medical benefits business from Buckeye Insurance Consultants, Inc. located in Lima, Ohio for a cash purchase price of $495,000 of which $198,000 is set aside for contingent payments to be paid in cash in 2016, 2017 and 2018 if certain conditions regarding future revenue are met.  As of September 30, 2015, management had determined there was goodwill of $273,000 and identifiable intangible assets of $175,000 consisting of a customer relationship intangible of $64,000 and a non-compete intangible of $111,000  related to the acquisition. Disclosure of pro forma results of this acquisition are not material to the Company’s consolidated financial statements. First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company to insure the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

The consolidated condensed statement of financial condition at December 31, 2014 has been derived from the audited financial statements at that date, which were included in First Defiance’s Annual Report on Form 10-K.

The accompanying consolidated condensed financial statements as of September 30, 2015 and for the three and nine month periods ended September 30, 2015 and 2014 have been prepared by First Defiance without audit and do not include information or footnotes necessary for the complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. These consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in First Defiance's 2014 Annual Report on Form 10-K for the year ended December 31, 2014. However, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for the fair presentation of the financial statements have been made. The results for the three and nine month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the entire year.

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Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Real Estate:
Real Estate	$ 1,256,807		$ 1,159,310
Other Loans:
Other Loans	532,236		527,009
Total loans	1,789,043		1,686,319
Deduct:
Undisbursed loan funds	(54,484)		(38,653)
Net deferred loan origination fees and costs	(1,021)		(880)
Allowance for loan loss	(25,209)	$ (25,384)	(24,766)	$ (24,567)	$ (24,627)	$ (24,950)
Totals	1,708,329		1,622,020
One to Four Family Residential Real Estate [Member]
Real Estate:
Real Estate	205,370		206,437
Multi Family Residential [Member]
Real Estate:
Real Estate	163,255		156,530
Commercial Real Estate [Member]
Real Estate:
Real Estate	758,952		683,958
Construction Loans [Member]
Real Estate:
Real Estate	129,230		112,385
Commercial Loan [Member]
Other Loans:
Other Loans	402,681		399,730
Home Equity and Home Improvement [Member]
Other Loans:
Other Loans	113,781		111,813
Consumer Loan [Member]
Other Loans:
Other Loans	$ 15,774		$ 15,466

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Other Comprehensive Income (Loss) (Details 1) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Securities Available For Sale, Beginning balance	$ 4,697	$ 906
Securities Available For Sale, Other comprehensive income (loss) before reclassifications	(205)	3,408
Securities Available For Sale,Amounts reclassified from accumulated other comprehensive income	0	(652)
Securities Available For Sale, Net other comprehensive income during period	(205)	2,756
Securities Available For Sale, Ending balance	4,492	3,662
Post-retirement Benefit, Beginning balance	(583)	(361)
Post-retirement Benefit, Other comprehensive income (loss) before reclassifications	0	0
Post-retirement Benefit, Amounts reclassified from accumulated other comprehensive income	0	0
Post-retirement Benefit, Net other comprehensive income during period	0	0
Post-retirement Benefit, Ending balance	(583)	(361)
Accumulated Other Comprehensive Income, Beginning balance	4,114	545
Accumulated Other Comprehensive Income, Other comprehensive income (loss) before reclassifications	(205)	3,408
Accumulated Other Comprehensive Income, Amounts reclassified from accumulated other comprehensive income	0	(652)
Accumulated Other Comprehensive Income, Net other comprehensive income during period	(205)	2,756
Accumulated Other Comprehensive Income, Ending balance	$ 3,909	$ 3,301

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Mortgage Banking (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items]
Gain from sale of mortgage loans	$ 1,197	$ 973	$ 3,728	$ 2,601
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue	866	870	2,593	2,652
Amortization of mortgage servicing rights	(407)	(366)	(1,264)	(1,026)
Mortgage servicing rights valuation adjustments	24	68	191	105
Mortgage loans servicing revenue (expense), Total	483	572	1,520	1,731
Net revenue from sale and servicing of mortgage loans	$ 1,680	$ 1,545	$ 5,248	$ 4,332

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

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

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

Assets and Liabilities Measured on a Recurring Basis

September 30, 2015	Level 1 Inputs		Level 2  Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	-	$	3,003	$	-	$	3,003
Mortgage-backed - residential		-		62,051		-		62,051
REMICs		-		1,682		-		1,682
Collateralized mortgage obligations		-		73,790		-		73,790
Preferred stock		1		-		-		1
Corporate bonds		1,989		3,993		-		5,982
Obligations of state and political subdivisions		-		90,417		-		90,417
Mortgage banking derivative - asset		-		738		-		738
Mortgage banking derivative - liability		-		100		-		100

December 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	-	$	980	$	-	$	980
Mortgage-backed - residential		-		59,856		-		59,856
REMICs		-		1,839		-		1,839
Collateralized mortgage obligations		-		81,121		-		81,121
Preferred stock		1		-		-		1
Corporate bonds		1,989		5,003		-		6,992
Obligations of state and political subdivisions		-		88,532		-		88,532
Mortgage banking derivative - asset		-		351		-		351
Mortgage banking derivative - liability		-		24		-		24

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

The table below presents a reconciliation and income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2014:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (In Thousands)
Beginning balance, January 1, 2014	$	582
Total gains or (losses) (realized/unrealized)
Included in earnings (realized)		(329)
Included in other comprehensive income (presented gross of taxes)		993
Amortization		-
Sales		(1,246)
Transfers in and/or out of Level 3		-
Ending balance, September 30, 2014	$	-

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)  (In Thousands)
Beginning balance, July 1, 2014	$	-
Total gains or (losses) (realized/unrealized)
Included in earnings (realized)		-
Included in other comprehensive income (presented gross of taxes)		-
Amortization		-
Sales		-
Transfers in and/or out of Level 3		-
Ending balance, September 30, 2014	$	-

Schedule of Changes in Fair Value of Plan Assets [Table Text Block]

Assets and Liabilities Measured on a Non-Recurring Basis

September 30, 2015	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	278	$	278
Multi Family Residential		-		-		102		102
Commercial Real Estate		-		-		4,726		4,726
Commercial loans		-		-		-		-
Home Equity and Improvement		-		-		94		94
Total Impaired loans		-		-		5,200		5,200
Mortgage servicing rights		-		874		-		874
Real estate held for sale
Residential		-		-		66		66
CRE		-		-		285		285
Total real estate held for sale		-		-		351		351

December 31, 2014	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
1-4 Family Residential Real Estate	$	-	$	-	$	419	$	419
Multi Family Residential		-		-		269		269
Commercial Real Estate		-		-		6,665		6,665
Commercial		-		-		340		340
Home Equity and Improvement		-		-		98		98
Total impaired loans		-		-		7,791		7,791
Mortgage servicing rights		-		1,034		-		1,034
Real estate held for sale
Residential		-		-		-		-
CRE		-		-		739		739
Total real estate held for sale		-		-		739		739

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

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2015, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair  Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
				(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	5,200	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10-30	%		11	%
Real estate held for sale – Applies to all classes	$	351	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		20-30	%		28	%

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

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
				(Dollars in Thousands)
Impaired Loans- Applies to all loan classes	$	7,791	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions		10-30	%		11	%
Real estate held for sale – Applies to all classes	$	739	Appraisals which utilize sales comparison, net income and cost approach	Discounts for changes in market conditions		20-40	%		28	%

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

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at September 30, 2015.

			Fair Value Measurements at September 30, 2015 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	73,308	$	73,308	$	73,308	$	-	$	-
Investment securities		237,177		237,179		1,990		235,189		-
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,715,030		1,730,554		-		7,245		1,723,309
Accrued interest receivable		7,142		7,142		-		1,368		5,774
Financial Liabilities:
Deposits	$	1,793,053	$	1,796,922	$	392,103	$	1,404,819	$	-
Advances from Federal Home Loan Bank		40,801		41,155		-		41,155		-
Securities sold under repurchase agreements		53,838		53,838		-		53,838		-
Subordinated debentures		36,083		35,307		-		-		35,307

			Fair Value Measurements at December 31, 2014 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	112,936	$	112,936	$	112,936	$	-	$	-
Investment securities		239,634		239,629		1,990		237,639		-
Federal Home Loan Bank Stock		13,802		N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		1,626,555		1,632,507		-		4,741		1,627,766
Accrued interest receivable		6,037		6,037		3		846		5,188
Financial Liabilities:
Deposits	$	1,760,813	$	1,762,733	$	379,552	$	1,383,181	$	-
Advances from Federal Home Loan Bank		21,544		21,772		-		21,772		-
Securities sold under repurchase agreements		54,759		54,759		-		54,759		-
Subordinated debentures		36,083		35,307		-		-		35,307

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Borrowings (Details 1) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Repurchase agreements:
Securities Sold Under Repurchase Agreements	$ 53,838	$ 54,759
Gross amount of recognized liabilities for repurchase agreements	53,838	54,759
Collateralized Mortgage Obligations [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	34,220	38,189
Maturity Greater than 90 Days [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Maturity Greater than 90 Days [Member] | Collateralized Mortgage Obligations [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Maturity 30 to 90 Days [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Maturity 30 to 90 Days [Member] | Collateralized Mortgage Obligations [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Maturity Less than 30 Days [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Maturity Less than 30 Days [Member] | Collateralized Mortgage Obligations [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Maturity Overnight [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	53,838	54,759
Maturity Overnight [Member] | Collateralized Mortgage Obligations [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	34,220	38,189
Residential Mortgage Backed Securities [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	19,618	16,570
Residential Mortgage Backed Securities [Member] | Maturity Greater than 90 Days [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Residential Mortgage Backed Securities [Member] | Maturity 30 to 90 Days [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Residential Mortgage Backed Securities [Member] | Maturity Less than 30 Days [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	0	0
Residential Mortgage Backed Securities [Member] | Maturity Overnight [Member]
Repurchase agreements:
Securities Sold Under Repurchase Agreements	$ 19,618	$ 16,570

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Affordable Housing Projects Tax Credit Partnership (Tables)

9 Months Ended

Sep. 30, 2015

Affordable Housing Projects Tax Credit Partnership [Abstract]

Other Commitments [Table Text Block]

As of September 30, 2015, the expected payments for unfunded affordable housing commitments were as follows:

(dollars in thousands)	Amount
2015	$	997
2016		612
2017		160
2018		414
2019		93
Thereafter		312
Total Unfunded Commitments	$	2,588

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended September 30,
(dollars in thousands)	2015		2014
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	118	$	65
Amortization expense in federal income taxes		89		48

	Nine Months Ended September 30,
(dollars in thousands)	2015		2014
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	354	$	397
Amortization expense in federal income taxes		268		296

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Borrowings

9 Months Ended

Sep. 30, 2015

Subordinated Borrowings [Abstract]

Subordinated Borrowings Disclosure [Text Block]

11. Borrowings

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

	September 30, 2015		December 31, 2014
	(In Thousands)
FHLB Advances:
Single maturity fixed rate advances	$	27,000	$	-
Putable advances		5,000		12,000
Amortizable mortgage advances		8,801		9,544
Total	$	40,801	$	21,544
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083

The putable advance can be put back to the Company at the option of the FHLB on a quarterly basis. A $5.0 million putable advance with a weighted average rate of 2.35% was not yet callable by the FHLB at September 30, 2015. The call date for this advance is December 14, 2015 and the maturity date is March 12, 2018. Putable advances are callable at the option of the FHLB on a quarterly basis.

In March 2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust II (Trust Affiliate II) that issued $15 million of Guaranteed Capital Trust Securities (Trust Preferred Securities). In connection with this transaction, the Company issued $15.5 million of Junior Subordinated Deferrable Interest Debentures (Subordinated Debentures) to Trust Affiliate II. The Company formed Trust Affiliate II for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Subordinated Debentures held by Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.5%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was 1.83% as of September 30, 2015 and 1.74% as of December 31, 2014.

The Trust Preferred Securities issued by Trust Affiliate II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on June 15, 2037, but can be redeemed at the Company’s option at any time now.

The Company also sponsored an affiliated trust, First Defiance Statutory Trust I (Trust Affiliate I), that issued $20 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was 1.71% and 1.62% on September 30, 2015 and December 31, 2014 respectively.

 

The Trust Preferred Securities issued by Trust Affiliate I are subject to mandatory redemption, in whole or in part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on December 15, 2035, but can be redeemed at the Company’s option at any time now.

The subordinated debentures may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

Interest on both issues of Trust Preferred Securities may be deferred for a period of up to five years at the option of the issuer.

Repurchase Agreements. We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and to facilitate secured short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. We monitor levels on a continuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agent.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2015 and December 31, 2014 is presented in the following tables.

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
At September 30, 2015			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	19,618	$	-	$	-	$	-	$	19,618
Collateralized mortgage obligations		34,220		-		-		-		34,220
Total borrowings	$	53,838	$	-	$	-	$	-	$	53,838
Gross amount of recognized liabilities for repurchase agreements									$	53,838

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
At December 31, 2014			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	16,570	$	-	$	-	$	-	$	16,570
Collateralized mortgage obligations		38,189		-		-		-		38,189
Total borrowings	$	54,759	$	-	$	-	$	-	$	54,759
Gross amount of recognized liabilities for repurchase agreements									$	54,759