DEFIANCE, Ohio, April 19 /PRNewswire-FirstCall/ --
-- Net Income of $1.5 million or $.12 per common share for 2010 first quarter -- Provision for Loan Losses of $6.9 million reflects improvement over fourth quarter of 2009 -- Net Interest Income increased by $1.0 million or 6.5% over 2009 first quarter -- Net Interest Margin of 3.85%, up from 2009 first quarter -- Other-Than-Temporary Impairment of $70,000 recognized on certain investment securities
First Defiance Financial Corp. today announced that net income for its first quarter ended March 31, 2010 totaled $1.5 million, or $0.12 per diluted common share, compared to $3.4 million or $0.36 per diluted common share for the quarter ended March 31, 2009.
"Additional provision expense, primarily related to a few larger credits, pulled down our first quarter earnings," said William J. Small, Chairman, President and Chief Executive Officer of First Defiance Financial Corp. "Our core banking operation continues to perform as expected and we are further encouraged by some national and local economic indicators that are showing signs of stabilization. However, we felt it was prudent to provide the additional reserves based on the information available to us."
Credit Quality
The first quarter results include expense for provision for loan losses of $6.9 million, compared with $2.7 million for the same period in 2009 and $8.5 million in the fourth quarter of 2009.
Non-performing loans totaled $40.6 million at March 31, 2010, a decrease from $47.9 million at December 31, 2009 and up from $36.7 million at March 31, 2009. The March 31, 2010 balance included $33.6 million of loans that are on non-accrual and another $7.0 million of loans considered non-performing because of changes in terms granted to borrowers, although the loans are still accruing interest. In addition, First Defiance had $12.8 million of Real Estate Owned at March 31, 2010 and $7.8 million at March 31, 2009. For the first quarter of 2010, First Defiance recorded net charge-offs of $4.5 million, which represented 1.14% of average loans outstanding (annualized) for the quarter.
"The economic challenges of the country and our market area are reflected in our quarterly results," said Mr. Small. "We recorded a provision for loan losses of $6.9 million in the first quarter. However, we did have a decrease in non-performing loans and I believe we are getting closer to seeing a change in the pattern of declining collateral values. We have worked diligently to identify and address stressed and underperforming credits and proactively work to identify all potential problems and mitigate our losses as much as possible."
Net Interest Margin up from 2009 First Quarter
Net interest income increased to $17.1 million for the first quarter of 2010, a 6.5% increase from the 2009 first quarter. Net interest margin was 3.85% for the 2010 first quarter compared to 3.82% in the fourth quarter of 2009 and 3.71% in the first quarter of 2009. Yield on interest earning assets declined in the 2010 first quarter by 38 basis points, to 5.39% from 5.77%, while the cost of interest-bearing liabilities and non-interest-bearing demand deposits decreased by 53 basis points, to 1.59% from 2.12%.
"We have been able to react to the market environment and stress disciplined pricing," commented Mr. Small. "However, while the overall margin was even with last quarter, I believe we will encounter ongoing challenges in the current low rate environment."
Investment Portfolio
The Other-Than-Temporary Impairment (OTTI) charge recognized by First Defiance in the first quarter of 2010 totaled $70,000, compared with $672,000 in the first quarter of 2009. The 2010 OTTI charge related to two Trust Preferred Collateralized Debt Obligations (CDOs) investments with a remaining book value of $1.1 million and a market value of $277,000.
First Defiance has other Trust Preferred CDO investments with a book value of $2.7 million and market values of $1.3 million at March 31, 2010. Two of these investments with a book value of $2.0 million and a market value of $1.0 million continue to pay principal and interest payments in accordance with the contractual terms of the securities. Management has not deemed the impairment in value of these two CDO investments to be Other-Than-Temporary and therefore has not recognized the reduction in value of those investments in earnings. The third investment with a book value of $751,000 and a market value of $295,000 has been written down with OTTI charge in prior periods however the first quarter of 2010 analysis did not result in additional OTTI for this investment.
Non-Interest Income
First Defiance's non-interest income for the 2010 first quarter remained relatively flat at $6.8 million compared with $6.8 million in the first quarter of 2009. Service fees and other charges were $3.2 million in the first quarter of 2010, compared with $3.1 million in the first quarter of 2009. Mortgage banking declined to $1.8 million in the first quarter of 2010 from $2.7 million in the first quarter of 2009. Gains from the sale of mortgage loans decreased in the first quarter of 2010 to $1.2 million from $2.8 million in the first quarter of 2009. Also, mortgage loan servicing revenue increased to $748,000 in the 2010 first quarter from $689,000 in the first quarter of 2009. The decreases in gains were partially offset by expense decreases of $531,000 for the amortization of mortgage servicing rights.
The company had a positive change in the valuation adjustment in mortgage servicing assets of $321,000 in the first quarter of 2010 compared with $169,000 in the first quarter of 2009. The MSR positive valuation adjustment is a reflection of the increase in the fair value of certain sectors of the Company's portfolio of mortgage servicing rights for these periods. The interest rate environment that gives rise to increased mortgage origination activity also typically causes increases in MSR amortization and impairment, creating a natural hedge in the mortgage banking line of business.
"We are pleased with the stability of our fee income stream in light of the many competitive and regulatory challenges," continued Mr. Small. "We did not have the high volume of mortgage refinances in the first quarter of 2010 that we had in 2009, due to the low mortgage interest rate environment at that time. However, we were able to offset most of the reduction in gain on mortgage sale revenue. Our retail network is focused on providing quality customer service and we remain a leading originator of mortgages in our market."
Income from the sale of insurance products decreased to $1.1 million for the 2010 first quarter, from $1.5 million in the same period of 2009. First Defiance's insurance subsidiary, First Insurance and Investments, typically recognizes contingent revenues during the first quarter. These revenues are bonuses paid by insurance carriers when the Company achieves certain loss ratios or growth targets. In 2010, First Insurance earned $91,000 of contingent income, compared to $431,000 recorded during the first quarter of 2009.
Non-Interest Expenses
Total non-interest expense for First Defiance decreased to $14.8 million for the quarter ended March 31, 2010, from the $15.0 million of non-interest expense for the quarter ended March 31, 2009. Compensation and benefits decreased by $908,000 or 12% compared to the 2009 first quarter. FDIC insurance expense increased to $1.0 million in the first quarter of 2010 from $567,000 in the same period of 2009, primarily as a result of the FDIC rate increases and 2009 special assessments. Occupancy expense decreased $289,000 or 14% compared to the 2009 first quarter. Other non-interest expense increased to $3.3 million in the first quarter of 2010 from $3.0 million in the first quarter of 2009, primarily due to increases in credit and collection expenses.
Total Assets at $2.06 Billion
Total assets at March 31, 2010 were $2.06 billion, compared to $2.01 billion at March 31, 2009. Net loans receivable (excluding loans held for sale) were $1.54 billion at March 31, 2010 compared to $1.56 billion at March 31, 2009. Total Cash and Cash equivalents were $154.7 million at March 31, 2010 compared with $111.6 million at March 31, 2009, an increase of $43.1 million. Total deposits at March 31, 2010 were $1.60 billion compared to $1.54 billion at March 31, 2009, an increase of $59.3 million. Non-interest bearing deposits at March 31, 2010 were $187.2 million compared to $163.9 million at March 31, 2009. Total stockholders' equity was $235.7 million at March 31, 2010 compared to $230.6 million at March 31, 2009. Also at March 31, 2010, goodwill and other intangible assets totaled $63.0 million compared to $64.5 million at March 31, 2009.
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, April 20, 2010 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-800-860-2442.
A live webcast may be accessed at http://www.talkpoint.com/viewer/starthere.asp?Pres=129947.
The audio replay of the Internet Web cast will be available at http://www.fdef.com/ until Wednesday, April 28, 2010 at 9:00 a.m.
Annual Meeting of Shareholders
First Defiance Financial Corp. will host its Annual Meeting of Shareholders at 2:00 p.m. on Tuesday, April 20, 2010 at the First Federal Bank operations center at 25600 Elliott Road in Defiance. Following the meeting, the audio replay, slide presentation and transcript will be available at the Company's Web site at http://www.fdef.com/.
First Defiance Financial Corp.
First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance & Investments. First Federal operates 33 full service branches and 45 ATM locations in northwest Ohio, southeast Michigan and Fort Wayne, Indiana. First Insurance & Investments specializes in property and casualty and group health and life insurance, with offices in Defiance and Bowling Green, Ohio.
For more information, visit the company's Web site at http://www.fdef.com/. Financial Statements and Highlights Follow- Safe Harbor Statement
This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell OREO properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission (SEC) filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2009. One or more of these factors have affected or could in the future affect the Company's business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.
Consolidated Balance Sheets First Defiance Financial Corp. (Unaudited) December March 31, 31, March 31, (in thousands) 2010 2009 2009 -------------- ---- ---- ---- Assets Cash and cash equivalents Cash and amounts due from depository institutions $28,678 $29,613 $27,523 Interest-bearing deposits 125,980 91,503 84,050 ------- ------ ------ 154,658 121,116 111,573 Securities Available-for sale, carried at fair value 146,448 137,458 122,633 Held-to-maturity, carried at amortized cost 1,887 1,920 853 ----- ----- --- 148,335 139,378 123,486 Loans 1,576,602 1,617,122 1,585,897 Allowance for loan losses (38,980) (36,547) (25,694) ------- ------- ------- Loans, net 1,537,622 1,580,575 1,560,203 Loans held for sale 12,357 10,346 23,588 Mortgage servicing rights 9,283 8,958 6,957 Accrued interest receivable 7,405 6,851 8,004 Federal Home Loan Bank stock 21,376 21,376 21,376 Bank Owned Life Insurance 30,555 30,804 28,806 Office properties and equipment 42,830 43,597 47,360 Real estate and other assets held for sale 12,768 13,527 7,839 Goodwill 56,585 56,585 56,585 Core deposit and other intangibles 6,450 6,888 7,953 Deferred taxes 3,525 3,289 910 Other assets 15,026 14,233 6,022 ------ ------ ----- Total Assets $2,058,775 $2,057,523 $2,010,662 ========== ========== ========== Liabilities and Stockholders' Equity Non-interest-bearing deposits $187,231 $189,132 $163,855 Interest-bearing deposits 1,412,353 1,391,094 1,376,380 --------- --------- --------- Total deposits 1,599,584 1,580,226 1,540,235 Advances from Federal Home Loan Bank 126,917 146,927 146,957 Notes payable and other interest-bearing liabilities 44,883 48,398 38,884 Subordinated debentures 36,083 36,083 36,083 Advance payments by borrowers for tax and insurance 397 665 474 Other liabilities 15,256 11,138 17,421 ------ ------ ------ Total liabilities 1,823,120 1,823,437 1,780,054 Stockholders' Equity Preferred stock, net of discount 36,334 36,293 36,172 Common stock, net 127 127 127 Common stock warrant 878 878 878 Additional paid-in- capital 140,725 140,677 140,510 Accumulated other comprehensive income (loss) 316 (158) (2,084) Retained earnings 129,906 128,900 127,643 Treasury stock, at cost (72,631) (72,631) (72,638) ------- ------- ------- Total stockholders' equity 235,655 234,086 230,608 Total liabilities and stockholders' equity $2,058,775 $2,057,523 $2,010,662 ========== ========== ========== Consolidated Statements of Income (Unaudited) First Defiance Financial Corp. Three Months Ended March 31, --------- (in thousands, except per share amounts) 2010 2009 ---------------------------------------- ---- ---- Interest Income: Loans $22,397 $23,377 Investment securities 1,452 1,492 Interest-bearing deposits 61 14 FHLB stock dividends 219 239 --- --- Total interest income 24,129 25,122 Interest Expense: Deposits 5,398 7,183 FHLB advances and other 1,218 1,319 Subordinated debentures 323 426 Notes Payable 105 157 --- --- Total interest expense 7,044 9,085 ----- ----- Net interest income 17,085 16,037 Provision for loan losses 6,889 2,746 ----- ----- Net interest income after provision for loan losses 10,196 13,291 Non-interest Income: Service fees and other charges 3,158 3,086 Mortgage banking income 1,807 2,714 Gain on sale of non-mortgage loans 37 55 Gain on securities 6 - Impairment on securities (70) (672) Insurance and investment sales commissions 1,109 1,523 Trust income 122 102 Income from Bank Owned Life Insurance 480 59 Other non-interest income 117 (63) --- --- Total Non-interest Income 6,766 6,804 Non-interest Expense: Compensation and benefits 6,457 7,365 Occupancy 1,828 2,117 FDIC insurance premium 1,046 567 State franchise tax 563 501 Data processing 1,196 1,054 Amortization of intangibles 437 391 Other non-interest expense 3,305 3,001 ----- ----- Total Non-interest Expense 14,832 14,996 ------ ------ Income before income taxes 2,130 5,099 Income taxes 624 1,691 --- ----- Net Income $1,506 $3,408 ====== ====== Dividends Accrued on Preferred Shares (463) (463) Accretion on Preferred Shares (40) (38) === === Net Income Applicable to Common Shares $1,003 $2,907 ====== ====== Earnings per common share: Basic $0.12 $0.36 Diluted $0.12 $0.36 Average Shares Outstanding: Basic 8,117 8,117 Diluted 8,142 8,117 Financial Summary and Comparison First Defiance Financial Corp. (Unaudited) Three Months Ended March 31, --------- (dollars in thousands, except per share data) 2010 2009 % change --------------------------------- ---- ---- -------- Summary of Operations Tax-equivalent interest income (1) 24,427 25,379 (3.8) Interest expense 7,044 9,085 (22.5) Tax-equivalent net interest income (1) 17,383 16,294 6.7 Provision for loan losses 6,889 2,746 150.9 Tax-equivalent NII after provision for loan loss (1) 10,494 13,548 (22.5) Gains on Securities 6 - NM Impairment losses on securities (70) (672) (89.6) Non-interest income-excluding securities gains/losses 6,830 7,476 (8.6) Non-interest expense 14,832 14,996 (1.1) Income taxes 624 1,691 (63.1) Net Income 1,506 3,408 (55.8) Dividends Declared on Preferred Shares (463) (463) - Accretion on Preferred Shares (40) (38) 5.3 Net Income Applicable to Common Shares 1,003 2,907 (65.5) Tax equivalent adjustment (1) 298 257 16.0 ----------------------------- --- --- ---- At Period End Assets 2,058,775 2,010,662 2.4 Earning assets 1,884,650 1,838,397 2.5 Loans 1,576,602 1,585,897 (0.6) Allowance for loan losses 38,980 25,694 51.7 Deposits 1,599,584 1,540,235 3.9 Stockholders' equity 235,655 230,608 2.2 -------------------- ------- ------- --- Average Balances Assets 2,048,506 1,984,985 3.2 Earning assets 1,831,867 1,782,019 2.8 Deposits and interest-bearing liabilities 1,798,408 1,736,933 3.5 Loans 1,560,405 1,596,592 (2.3) Deposits 1,576,140 1,514,059 4.1 Stockholders' equity 235,492 230,099 2.3 Stockholders' equity / assets 11.50% 11.59% (0.8) ----------------------------- ----- ----- ---- Per Common Share Data Net Income Basic $0.12 $0.36 (66.7) Diluted 0.12 0.36 (66.7) Dividends - 0.17 (100.0) Market Value: High $12.33 $8.95 37.8 Low 9.20 3.76 144.7 Close 10.12 6.08 66.4 Book Value 24.45 23.95 2.1 Tangible Book Value 16.68 15.90 4.9 Shares outstanding, end of period (000) 8,117 8,117 - --------------------------------- ----- ----- --- Performance Ratios (annualized) Tax-equivalent net interest margin (1) 3.85% 3.71% 4.0 Return on average assets 0.30% 0.70% (57.3) Return on average equity 2.59% 6.02% (56.9) Efficiency ratio (2) 61.26% 63.09% (2.9) Effective tax rate 29.30% 33.16% (11.7) Dividend payout ratio (basic) 0.00% 47.22% (100.0) ----------------------------- ---- ----- ------ (1) Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35% (2) Efficiency ratio = Non-interest expense divided by sum of tax- equivalent net interest income plus non-interest income, excluding securities gains or losses, net. NM Percentage change not meaningful Income from Mortgage Banking Revenue from sales and servicing of mortgage loans consisted of the following: Three months ended March 31, --------- (dollars in thousands) 2010 2009 ---------------------- ---- ---- Gain from sale of mortgage loans $1,164 $2,813 Mortgage loan servicing revenue (expense): Mortgage loan servicing revenue 748 689 Amortization of mortgage servicing rights (426) (957) Mortgage servicing rights valuation adjustments 321 169 --- --- 643 (99) --- --- Total revenue from sale and servicing of mortgage loans $1,807 $2,714 ====== ====== Yield Analysis First Defiance Financial Corp. Three Months Ended March 31, (dollars in thousands) ---------------------- 2010 ---- Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,560,405 $22,436 5.83% Securities 141,646 1,711 4.96% Interest Bearing Deposits 108,440 61 0.23% FHLB stock 21,376 219 4.15% ------ --- Total interest-earning assets 1,831,867 24,427 5.41% Non-interest-earning assets 216,639 Total assets $2,048,506 ========== Deposits and Interest- bearing liabilities: Interest bearing deposits $1,391,945 $5,398 1.57% FHLB advances and other 141,759 1,218 3.48% Other Borrowings 44,280 105 0.96% Subordinated debentures 36,229 323 3.62% ------ --- Total interest-bearing liabilities 1,614,213 7,044 1.77% Non-interest bearing deposits 184,195 - - ------- --- Total including non- interest-bearing demand deposits 1,798,408 7,044 1.59% Other non-interest-bearing liabilities 14,606 ------ Total liabilities 1,813,014 Stockholders' equity 235,492 Total liabilities and stockholders' equity $2,048,506 ========== Net interest income; interest rate spread $17,383 3.64% ======= ==== Net interest margin (3) 3.85% ==== Average interest-earning assets to average interest bearing liabilities 113% ============================ === Three Months Ended March 31, (dollars in thousands) ---------------------- 2009 ---- Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,596,592 $23,405 5.95% Securities 119,314 1,721 5.78% Interest Bearing Deposits 44,737 14 0.13% FHLB stock 21,376 239 4.53% ------ --- Total interest-earning assets 1,782,019 25,379 5.77% Non-interest-earning assets 202,966 Total assets $1,984,985 ========== Deposits and Interest- bearing liabilities: Interest bearing deposits $1,348,178 $7,183 2.16% FHLB advances and other 147,091 1,319 3.64% Other Borrowings 39,532 157 1.61% Subordinated debentures 36,251 426 4.77% ------ --- Total interest-bearing liabilities 1,571,052 9,085 2.35% Non-interest bearing deposits 165,881 - - ------- --- Total including non- interest-bearing demand deposits 1,736,933 9,085 2.12% Other non-interest-bearing liabilities 17,953 ------ Total liabilities 1,754,886 Stockholders' equity 230,099 Total liabilities and stockholders' equity $1,984,985 ========== Net interest income; interest rate spread $16,294 3.42% ======= ==== Net interest margin (3) 3.71% ==== Average interest-earning assets to average interest bearing liabilities 113% ============================ === (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. Selected Quarterly Information First Defiance Financial Corp. (dollars in thousands, except per share 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr data) 2010 2009 2009 2009 2009 ----------- ------- ------- ------- ------- ------- Summary of Operations Tax- equivalent interest income (1) $24,427 $25,434 $25,796 $25,117 $25,379 Interest expense 7,044 7,614 7,914 8,643 9,085 Tax- equivalent net interest income (1) 17,383 17,820 17,882 16,474 16,294 Provision for loan losses 6,889 8,470 8,051 3,965 2,746 Tax- equivalent NII after provision for loan losses (1) 10,494 9,350 9,831 12,509 13,548 Investment securities gains (losses), including impairment (64) (1,394) (840) (750) (672) Non- interest income (excluding securities gains/ losses) 6,830 6,970 6,396 9,109 7,476 Non- interest expense 14,832 14,609 14,786 16,133 14,996 Income taxes 624 (525) (37) 1,539 1,691 Net income 1,506 555 329 2,901 3,408 Dividends Declared on Preferred Shares (463) (447) (473) (468) (463) Accretion on Preferred Shares (40) (41) (40) (40) (38) Net Income Applicable to Common Shares 1,003 67 (184) 2,393 2,907 Tax equivalent adjustment (1) 298 287 309 295 257 ----------- --- --- --- --- --- At Period End Total assets $2,058,775 $2,057,523 $2,018,598 $2,023,563 $2,010,662 Earning assets 1,884,650 1,879,725 1,845,134 1,846,689 1,838,397 Loans 1,576,602 1,617,122 1,623,627 1,610,460 1,585,897 Allowance for loan losses 38,980 36,547 31,248 25,840 25,694 Deposits 1,599,584 1,580,226 1,543,085 1,553,144 1,540,235 Stockholders' equity 235,655 234,086 234,529 232,683 230,608 Stockholders' equity / assets 11.45% 11.38% 11.62% 11.50% 11.47% Goodwill 56,585 56,585 56,585 56,585 56,585 -------- ------ ------ ------ ------ ------ Average Balances Total assets $2,048,506 $2,058,219 $2,029,970 $2,027,760 $1,984,985 Earning assets 1,831,867 1,852,401 1,826,400 1,828,272 1,782,019 Deposits and interest- bearing liabilities 1,798,408 1,805,090 1,778,223 1,778,848 1,736,933 Loans 1,560,405 1,600,265 1,613,529 1,592,513 1,596,592 Deposits 1,576,140 1,572,399 1,550,369 1,552,533 1,514,059 Stockholders' equity 235,492 235,152 234,241 231,397 230,099 Stockholders' equity / assets 11.50% 11.43% 11.54% 11.41% 11.59% ------------- ----- ----- ----- ----- ----- Per Common Share Data Net Income: Basic $0.12 $0.01 $(0.02) $0.29 $0.36 Diluted 0.12 0.01 (0.02) 0.29 0.36 Dividends - - 0.04 0.09 0.17 Market Value: High $12.33 $18.93 $18.33 $14.25 $8.95 Low 9.20 10.06 12.00 6.10 3.76 Close 10.12 11.29 14.91 13.00 6.08 Book Value 24.45 24.26 24.32 24.10 23.85 Shares outstanding, end of period (in thousands) 8,117 8,118 8,118 8,118 8,117 ------------- ----- ----- ----- ----- ----- Performance Ratios (annualized) Tax- equivalent net interest margin (1) 3.85% 3.82% 3.88% 3.61% 3.71% Return on average assets 0.30% 0.11% 0.06% 0.57% 0.70% Return on average equity 2.59% 0.94% 0.56% 5.03% 6.02% Efficiency ratio (2) 61.26% 58.93% 60.90% 63.06% 63.09% Effective tax rate 29.30% -1750.00% -12.67% 34.66% 33.16% Common dividend payout ratio (basic) 0.00% 0.00% -200.00% 29.31% 47.22% --------- ---- ---- ------- ----- ----- (1) Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35% (2) Efficiency ratio = Non-interest expense divided by sum of tax- equivalent net interest income plus non-interest income, excluding securities gains, net and asset sales gains, net. Selected Quarterly Information First Defiance Financial Corp. (dollars in thousands, 1st Qtr 4th Qtr 3rd Qtr except per share data) 2010 2009 2009 ---------------------- -------- -------- -------- Loan Portfolio Composition One to four family residential real estate $222,099 $227,592 $233,958 Construction 46,369 48,626 53,605 Commercial real estate 797,448 806,889 802,434 Commercial 352,923 379,408 371,881 Consumer finance 31,719 34,105 36,416 Home equity and improvement 144,826 147,977 150,379 ------- ------- ------- Total loans 1,595,384 1,644,597 1,648,673 Less: Loans in process 17,794 26,494 23,957 Deferred loan origination fees 988 981 1,089 Allowance for loan loss 38,980 36,547 31,248 Net Loans $1,537,622 $1,580,575 $1,592,379 ========== ========== ========== Allowance for loan loss activity Beginning allowance 36,547 $31,248 $25,840 Provision for loan losses 6,889 8,470 8,051 Credit loss charge-offs: One to four family residential real estate 326 884 744 Commercial real estate 3,191 1,912 1,152 Commercial 735 354 658 Consumer finance 25 75 39 Home equity and improvement 399 134 196 --- --- --- Total charge-offs 4,676 3,359 2,789 Total recoveries 220 188 146 --- --- --- Net charge-offs (recoveries) 4,456 3,171 2,643 Ending allowance $38,980 $36,547 $31,248 ======= ======= ======= Credit Quality Non-accrual loans $33,567 $41,191 $35,490 Restructured loans, accruing 7,023 6,715 4,574 ----- ----- ----- Total non-performing loans (1) 40,590 47,906 40,064 Real estate owned (REO) 12,768 13,527 9,352 Total non-performing assets (2) $53,358 $61,433 $49,416 ======= ======= ======= Net charge-offs 4,456 3,171 2,643 Allowance for loan losses / loans 2.47% 2.26% 1.92% Allowance for loan losses / non-performing assets 73.05% 59.49% 63.23% Allowance for loan losses / non-performing loans 96.03% 76.29% 78.00% Non-performing assets / loans plus REO 3.36% 3.77% 3.03% Non-performing assets / total assets 2.59% 2.99% 2.45% Net charge-offs /average loans (annualized) 1.14% 0.79% 0.66% Deposit Balances Non-interest-bearing demand deposits $187,231 $189,132 $174,145 Interest-bearing demand deposits and money market 525,311 499,575 477,566 Savings deposits 138,364 130,156 132,333 Retail time deposits less than $100,000 539,313 550,172 544,957 Retail time deposits greater than $100,000 161,071 163,838 166,787 National/Brokered time deposits 48,294 47,353 47,297 Total deposits $1,599,584 $1,580,226 $1,543,085 ========== ========== ========== (dollars in thousands, except per 2nd Qtr 1st Qtr share data) 2009 2009 --------------------------------- -------- -------- Loan Portfolio Composition One to four family residential real estate $238,000 $241,119 Construction 44,670 50,534 Commercial real estate 768,636 764,841 Commercial 382,434 350,070 Consumer finance 38,074 38,676 Home equity and improvement 151,213 156,668 ------- ------- Total loans 1,623,027 1,601,908 Less: Loans in process 11,602 14,954 Deferred loan origination fees 965 1,057 Allowance for loan loss 25,840 25,694 Net Loans $1,584,620 $1,560,203 ========== ========== Allowance for loan loss activity Beginning allowance $25,694 $24,592 Provision for loan losses 3,965 2,746 Credit loss charge-offs: One to four family residential real estate 505 148 Commercial real estate 2,066 669 Commercial 950 702 Consumer finance 83 123 Home equity and improvement 301 130 --- --- Total charge-offs 3,905 1,772 Total recoveries 86 128 --- --- Net charge-offs (recoveries) 3,819 1,644 Ending allowance $25,840 $25,694 ======= ======= Credit Quality Non-accrual loans $35,528 $29,473 Restructured loans, accruing 4,845 7,199 ----- ----- Total non-performing loans (1) 40,373 36,672 Real estate owned (REO) 8,567 7,839 Total non-performing assets (2) $48,940 $44,511 ======= ======= Net charge-offs 3,819 1,644 Allowance for loan losses / loans 1.60% 1.62% Allowance for loan losses /non- performing assets 52.80% 57.73% Allowance for loan losses /non- performing loans 64.00% 70.06% Non-performing assets /loans plus REO 3.02% 2.79% Non-performing assets /total assets 2.42% 2.21% Net charge-offs /average loans (annualized) 0.96% 0.41% Deposit Balances Non-interest-bearing demand deposits $180,035 $163,855 Interest-bearing demand deposits and money market 456,177 413,104 Savings deposits 135,821 132,590 Retail time deposits less than $100,000 568,595 608,811 Retail time deposits greater than $100,000 165,401 171,588 National/Brokered time deposits 47,115 50,287 Total deposits $1,553,144 $1,540,235 ========== ========== (1) Non-performing loans consist of non-accrual loans that are contractually past due 90 days or more and loans that are deemed impaired. (2) Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof. Loan Delinquency Information First Defiance Financial Corp. 30 to 89 Non Troubled (dollars in Total days past Accrual Debt thousands) Balance Current due Loans Restructuring ----------- ------- ------- --------- ------- ------------- March 31, 2010 -------------- One to four family residential real estate $222,099 $207,733 $4,749 $6,572 $3,045 Construction 46,369 46,129 65 175 - Commercial real estate 797,448 768,334 6,962 18,241 3,911 Commercial 352,923 338,513 6,866 7,498 46 Consumer finance 31,719 31,490 170 59 - Home equity and improvement 144,826 142,598 1,185 1,022 21 ------- Total loans $1,595,384 $1,534,797 $19,997 $33,567 $7,023 ========== ========== ======= ======= ====== December 31, 2009 ----------------- One to four family residential real estate $227,592 $215,211 $4,331 $5,349 $2,701 Construction 48,626 47,951 - 675 - Commercial real estate 806,889 775,603 3,280 24,042 3,964 Commercial 379,408 367,592 1,151 10,615 50 Consumer finance 34,105 33,669 377 59 - Home equity and improvement 147,977 145,481 2,045 451 - ------- Total loans $1,644,597 $1,585,507 $11,184 $41,191 $6,715 ========== ========== ======= ======= ====== September 30, 2009 ------------------ One to four family residential real estate $233,958 $221,077 $4,637 $5,839 $2,405 Construction 53,605 53,340 71 194 - Commercial real estate 802,434 765,469 11,570 23,279 2,116 Commercial 371,881 363,739 2,525 5,564 53 Consumer finance 36,416 35,913 454 49 - Home equity and improvement 150,379 147,031 2,783 565 - Total loans $1,648,673 $1,586,569 $22,040 $35,490 $4,574 ========== ========== ======= ======= ====== March 31, 2009 -------------- One to four family residential real estate $241,119 $229,418 $4,201 $6,167 $1,333 Construction 50,534 50,112 297 125 - Commercial real estate 764,841 728,777 13,140 18,450 4,474 Commercial 350,070 341,582 3,111 4,008 1,369 Consumer finance 38,676 38,318 301 57 - Home equity and improvement 156,668 153,183 2,796 666 23 ------- ----- --- --- Total loans $1,601,908 $1,548,589 $23,846 $29,473 $7,199 ========== ========== ======= ======= ======
First Defiance Financial Corp.
CONTACT: William J. Small, Chairman, President and CEO, +1-419-782-5104,
bsmall@first-fed.com
Web Site: http://www.fdef.com/
