DEFIANCE, Ohio, Jan. 24, 2011 /PRNewswire/ --
-- Net Income of $2.3 million for 2010 fourth quarter, up from $555,000 in the fourth quarter of 2009 -- Provision for Loan Losses of $5.7 million, down from $8.5 million in the fourth quarter of 2009 -- Expenses related to core system conversion of $802,000 in the fourth quarter -- Positive valuation adjustment of $1.1 million on Mortgage Servicing Rights
First Defiance Financial Corp. today announced that net income for the fiscal year ended December 31, 2010 totaled $8.1 million, or $.75 per diluted common share compared to $7.2 million or $.63 per diluted common share for the year ended December 31, 2009. The 2010 twelve month results included $1.3 million of core conversion related charges associated with the successful conversion to a new core processing provider. For the fourth quarter ended December 31, 2010, First Defiance earned $2.3 million or $.22 per diluted common share compared to $555,000 or $0.01 per diluted common share for the fourth quarter of 2009. The fourth quarter of 2010 included $802,000 of core conversion charges.
"I am pleased to report that despite the very difficult operating environment in 2010, First Defiance Financial Corp. was once again profitable," said William J. Small, Chairman, President, and Chief Executive Officer of First Defiance Financial Corp. "Our core operating metrics remained strong throughout the year and asset quality stabilized in the last half of the year. Plus, Net Income is up on both a quarterly and full year basis."
Credit Quality
The fourth quarter 2010 results include expense for provision for loan losses of $5.7 million, compared with $8.5 million in the same period in 2009 and $5.2 million in the third quarter of 2010. "We have been working to strengthen the reserve for loan loss to adequately cover probable future credit losses in this challenging credit environment," said Small. "The allowance for loan loss as a percentage of total loans increased slightly to 2.70% at December 31, 2010 from 2.66% at September 30, 2010 and 2.26% at December 31, 2009."
Non-performing loans totaled $47.1 million at December 31, 2010, down from $47.9 million at December 31, 2009. The December 31, 2010 balance included $41.0 million of loans that are on non-accrual or 90 days past due and another $6.1 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 $9.6 million of Real Estate Owned at December 31, 2010, down from $13.5 million at December 31, 2009. For the fourth quarter of 2010, First Defiance recorded net charge-offs of $5.9 million, which represented 1.58% of average loans outstanding (annualized) for the quarter, compared with 0.70% in the third quarter of 2010 and 0.79% in the fourth quarter of 2009.
"Asset quality continues to have an impact on earnings in this economy," Small said. "We are still dealing with uncertainty in the commercial real estate market and stubbornly high unemployment rates in our region. However, we had a slight improvement in the fourth quarter over the third quarter results in the level of non-performing assets. We hope this indicates a positive trend."
Core System Conversion
The company successfully converted its core systems in the fourth quarter, with no significant service interruptions or client impact. "The core conversion project consumed significant resources, in both capital and staff terms," said Small. "The reach of this project was pervasive, and it took many months to unfold. I am proud of the conversion team and their efforts, as they consistently placed client needs first and worked to mitigate any negative effects. We can now move on to maximizing the advantages of the new system."
Net Interest Margin
Net interest income increased to $17.8 million in the fourth quarter of 2010 compared to $17.5 million in the 2009 fourth quarter, and was flat with the third quarter of 2010, which was $17.8 million. Net interest margin was 3.89% for the 2010 fourth quarter compared to 3.94% in the third quarter of 2010 and 3.82% in the fourth quarter of 2009. Yield on interest earning assets declined by 36 basis points, to 5.09% in the fourth quarter of 2010 from 5.45% in the 2009 fourth quarter, while the cost of interest-bearing liabilities and non-interest-bearing demand deposits decreased by 45 basis points, to 1.22% from 1.67%.
"We are pleased with the stability of our net interest margin for the quarter," said Small. "We will continue to look for pricing and other opportunities to maintain our margin in this extended low rate environment."
Non-Interest Income
Non-interest income for the 2010 fourth quarter increased to $7.6 million from $5.6 million in the fourth quarter of 2009. Loss on investment securities was $14,000 for the fourth quarter of 2010, compared with a loss of $1.4 million net of a gain of $5,000 in the fourth quarter of 2009. Mortgage banking income increased to $2.7 million in the fourth quarter of 2010, compared with $2.1 million in the same period in 2009. Gains from the sale of mortgage loans increased in the fourth quarter of 2010 to $1.8 million from $1.5 million in the fourth quarter of 2009. Mortgage loan servicing revenue increased slightly to $856,000 in the fourth quarter 2010 over the fourth quarter of 2009.
First Defiance recorded a positive valuation adjustment of $1.1 million on mortgage servicing rights (MSR) in the fourth quarter of 2010, compared with $397,000 in the fourth quarter of 2009. The MSR valuation adjustment is a reflection of the increase in the fair value of certain sectors of the Company's portfolio of mortgage servicing rights.
"Mortgage banking income for the quarter was strong, with originations of $154 million," commented Small. "This was an increase from the third quarter; our production clearly benefited from the low rate environment. However, we did see originations begin to slow in December and as the pipeline works down we anticipate lower production through the first part of 2011."
Non-Interest Expenses
Total non-interest expense was $16.5 million for the quarter ended December 31, 2010, an increase from the $14.6 million of non-interest expense in the fourth quarter of 2009. The fourth quarter of 2010 included $802,000 of core conversion related charges.
Compensation and benefits increased by $845,000 compared to the 2009 fourth quarter. FDIC insurance expense increased to $885,000 in the fourth quarter of 2010 from $637,000 in the same period of 2009 as a result of the FDIC rate increases and higher insured deposits. Other non-interest expense increased to $4.4 million in the fourth quarter of 2010 from $3.7 million in the fourth quarter of 2009. Credit, collection and OREO-related costs were $934,000 in the quarter, a $283,000 reduction over the fourth quarter of 2009. Deferred compensation expense increased $162,000 from the fourth quarter of 2009. These increases were partially offset by decreases in marketing and miscellaneous other operating expenses.
Annual Results
On an annual basis, earnings for 2010 were $8.1 million compared with $7.2 million in 2009. Net interest income for 2010 totaled $70.2 million, a $2.8 million or 4.2% increase over 2009. Average interest-earning assets increased to $1.836 billion for 2010 compared to $1.822 billion in 2009. Net interest margin for 2010 was 3.89%, compared with 3.76% for 2009.
The provision for loan losses for 2010 was $23.2 million, which was even with the $23.2 million in 2009.
Non-interest income for the twelve month period ended December 31, 2010 was $27.6 million compared to $26.3 million during the same period of 2009. The 2010 results include securities losses of $339,000, of which $331,000 related to OTTI charges recognized for impaired investment securities. The 2009 securities losses of $3.7 million included $3.9 million related to OTTI which was partially offset by securities gains of $284,000. Service fees and other charges were $12.7 million for the year compared to $13.5 million during 2009. Mortgage banking income for 2010 was $7.8 million, down from $9.7 million in 2009. Non-interest expense increased to $63.5 million for the full year of 2010 from $60.5 million in 2009. Excluding the core conversion related charges in 2010 of $1.3 million, non-interest expense increased by 2.7%. FDIC insurance expense increased to $3.8 million from $3.4 million in 2009.
Non-interest expense also includes $5.5 million of credit, collection and OREO-related costs compared with $3.4 million in 2009. The year over year decrease in expense relating to deferred compensation was $175,000.
Total Assets at $2.04 Billion
Total assets at December 31, 2010 were $2.04 billion, compared to $2.06 billion at December 31, 2009. Net loans receivable (excluding loans held for sale) were $1.48 billion at December 31, 2010 compared to $1.58 billion at December 31, 2009. Total cash and cash equivalents were $169.2 million at December 31, 2010 compared with $121.1 million at December 31, 2009, an increase of $48.1 million. Total deposits at December 31, 2010 were $1.58 billion, unchanged from December 31, 2009. Non-interest bearing deposits at December 31, 2010 were $216.7 million compared to $189.1 million at December 31, 2009. Total stockholders' equity was $240.3 million at December 31, 2010 compared to $234.1 million at the December 31, 2009. Also at December 31, 2010, goodwill and other intangible assets totaled $63.7 million compared to $63.5 million at December 31, 2009.
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EST) on Tuesday, January 25, 2011 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=133653.
Audio replay of the Internet Web cast will be available at http://www.fdef.com/ until February 28, 2011 at 9:00 a.m.
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, Archbold, Bryan 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 31, December 31, (in thousands) 2010 2009 -------------- ---- ---- Assets Cash and cash equivalents Cash and amounts due from depository institutions $26,164 $29,613 Interest-bearing deposits 143,000 91,503 ------- ------ 169,164 121,116 Securities Available-for sale, carried at fair value 165,252 137,458 Held-to-maturity, carried at amortized cost 839 1,920 --- ----- 166,091 139,378 Loans 1,519,503 1,617,122 Allowance for loan losses (41,080) (36,547) ------- ------- Loans, net 1,478,423 1,580,575 Loans held for sale 18,127 10,346 Mortgage servicing rights 9,477 8,958 Accrued interest receivable 6,374 6,851 Federal Home Loan Bank stock 21,012 21,376 Bank Owned Life Insurance 34,979 30,804 Office properties and equipment 41,743 43,597 Real estate and other assets held for sale 9,591 13,527 Goodwill 57,556 56,585 Core deposit and other intangibles 6,128 6,888 Deferred taxes 6,799 3,289 Other assets 11,047 14,233 ------ ------ Total Assets $2,036,511 $2,057,523 ========== ========== Liabilities and Stockholders' Equity Non-interest-bearing deposits $216,699 $189,132 Interest-bearing deposits 1,358,720 1,391,094 --------- --------- Total deposits 1,575,419 1,580,226 Advances from Federal Home Loan Bank 116,885 146,927 Notes payable and other interest- bearing liabilities 56,247 48,398 Subordinated debentures 36,083 36,083 Advance payments by borrowers for tax and insurance 937 665 Other liabilities 10,609 11,138 ------ ------ Total liabilities 1,796,180 1,823,437 Stockholders' Equity Preferred stock-including warrants and amortization of discount on preferred shares 36,463 36,293 Common stock, net 127 127 Common stock warrant 878 878 Additional paid-in-capital 140,845 140,677 Accumulated other comprehensive income (loss) (342) (158) Retained earnings 134,988 128,900 Treasury stock, at cost (72,628) (72,631) ------- ------- Total stockholders' equity 240,331 234,086 Total Liabilities and Stockholders' Equity $2,036,511 $2,057,523 ========== ========== Consolidated Statements of Income (Unaudited) First Defiance Financial Corp. Three Months Ended Twelve Months Ended December 31, December 31, ------------ ------------ (in thousands, except per share amounts) 2010 2009 2010 2009 ----------------- ---- ---- ---- ---- Interest Income: Loans $21,524 $23,473 $88,628 $93,702 Investment securities 1,499 1,385 6,055 5,773 Interest-bearing deposits 105 60 303 149 FHLB stock dividends 201 229 879 955 --- --- --- --- Total interest income 23,329 25,147 95,865 100,579 Interest Expense: Deposits 4,030 5,896 19,222 26,102 FHLB advances and other 1,086 1,249 4,711 5,114 Subordinated debentures 332 332 1,314 1,471 Notes Payable 126 137 455 570 --- --- --- --- Total interest expense 5,574 7,614 25,702 33,257 ----- ----- ------ ------ Net interest income 17,755 17,533 70,163 67,322 Provision for loan losses 5,652 8,470 23,177 23,232 ----- ----- ------ ------ Net interest income after provision for loan losses 12,103 9,063 46,986 44,090 Non-interest Income: Service fees and other charges 2,884 3,514 12,740 13,503 Mortgage banking income 2,733 2,070 7,847 9,747 Gain on sale of non-mortgage loans 419 13 516 264 Gain/(Loss) on sale of securities (14) 5 (8) 284 Impairment on securities - (1,399) (331) (3,940) Insurance and investment sales commissions 1,302 1,076 5,140 5,021 Trust income 135 109 507 415 Income from Bank Owned Life Insurance 229 219 1,146 557 Other non- interest income (134) (31) 33 444 ---- --- --- --- Total Non- interest Income 7,554 5,576 27,590 26,295 Non-interest Expense: Compensation and benefits 7,242 6,397 27,403 27,898 Occupancy 1,784 1,951 7,048 7,852 FDIC insurance premium 885 637 3,766 3,350 State franchise tax 467 326 2,088 1,994 Data processing 1,353 1,211 4,909 4,541 Amortization of intangibles 356 355 1,495 1,456 One time acquisition related charges 10 - 63 - Other non- interest expense 4,388 3,732 16,691 13,433 ----- ----- ------ ------ Total Non- interest Expense 16,485 14,609 63,463 60,524 ------ ------ ------ ------ Income before income taxes 3,172 30 11,113 9,861 Income taxes 904 (525) 3,004 2,667 --- ---- ----- ----- Net Income $2,268 $555 $8,109 $7,194 ====== ==== ====== ====== Dividends Accrued on Preferred Shares (463) (447) (1,850) (1,850) Accretion on Preferred Shares (43) (41) (171) (160) === === ==== ==== Net Income Applicable to Common Shares $1,762 $67 $6,088 $5,184 ====== === ====== ====== Earnings per common share: Basic $0.22 $0.01 $0.75 $0.64 Diluted $0.22 $0.01 $0.75 $0.63 Core operating earnings per common share*: Basic $0.22 $0.01 $0.75 $0.64 Diluted $0.22 $0.01 $0.75 $0.63 Average Shares Outstanding: Basic 8,118 8,117 8,118 8,117 Diluted 8,178 8,265 8,153 8,196 * - See Non-GAAP Disclosure Reconciliations Financial Summary and Comparison First Defiance Financial Corp. (Unaudited) Three Months Ended December 31, ------------ (dollars in thousands, except per share data) 2010 2009 % change --------------------------------------- ---- ---- -------- Summary of Operations Tax-equivalent interest income (1) $23,651 $25,434 (7.0%) Interest expense 5,574 7,614 (26.8) Tax-equivalent net interest income (1) 18,077 17,820 1.4 Provision for loan losses 5,652 8,470 (33.3) Tax-equivalent NII after provision for loan loss (1) 12,425 9,350 32.9 Investment Securities gains (losses) (14) 5 (380.0) Impairment losses on securities - (1,399) (100.0) Non-interest income-excluding securities losses 7,568 6,970 8.6 Non-interest expense 16,485 14,609 12.8 Non-interest expense-excluding non- core charges 16,475 14,609 12.8 One time acquisition related charges 10 - NM Income taxes 904 (525) (272.2) Net Income 2,268 555 308.6 Dividends Declared on Preferred Shares (463) (447) 3.6 Accretion on Preferred Shares (43) (41) 4.9 Net Income Applicable to Common Shares 1,762 67 2,529.9 Core operating earnings (2) 2,274 555 309.7 Tax equivalent adjustment (1) 322 287 12.2 ----------------------------- --- --- ---- At Period End Assets 2,036,511 2,057,523 (1.0) Earning assets 1,867,733 1,879,725 (0.6) Loans 1,519,503 1,617,122 (6.0) Allowance for loan losses 41,080 36,547 12.4 Deposits 1,575,419 1,580,226 (0.3) Stockholders' equity 240,331 234,086 2.7 -------------------- ------- ------- --- Average Balances Assets 2,063,965 2,058,219 0.3 Earning assets 1,844,206 1,852,401 (0.4) Deposits and interest-bearing liabilities 1,805,620 1,805,090 0.0 Loans 1,496,374 1,600,265 (6.5) Deposits 1,601,516 1,572,399 1.9 Stockholders' equity 241,902 235,152 2.9 Stockholders' equity / assets 11.72% 11.43% 2.6 ----------------------------- ----- ----- --- Per Common Share Data Net Income Basic $0.22 $0.01 2,100.0 Diluted 0.22 0.01 2,100.0 Core operating earnings (2) Basic $0.22 $0.01 2,538.5 Diluted 0.22 0.01 2,566.9 Dividends - - NM Market Value: High $12.32 $18.93 (34.9) Low 9.94 10.06 (1.2) Close 11.90 11.29 5.4 Book Value 25.00 24.26 3.1 Tangible Book Value 17.16 16.44 4.4 Shares outstanding, end of period (000) 8,118 8,118 - --------------------------------------- ----- ----- --- Performance Ratios (annualized) Tax-equivalent net interest margin (1) 3.89% 3.82% 2.0 Return on average assets -GAAP 0.44% 0.11% 307.5 Return on average equity- GAAP 3.72% 0.94% 297.2 Efficiency ratio (2) -GAAP 64.28% 58.93% 9.1 Effective tax rate 28.50% -1750.00% (101.6) Dividend payout ratio (basic) 0.00% 0.00% NM ----------------------------- ---- ---- -- (Unaudited) Twelve Months Ended December 31, ------------ (dollars in thousands, except per share data) 2010 2009 % change --------------------------------------- ---- ---- -------- Summary of Operations Tax-equivalent interest income (1) $97,108 $101,727 (4.5%) Interest expense 25,702 33,257 (22.7) Tax-equivalent net interest income (1) 71,406 68,470 4.3 Provision for loan losses 23,177 23,232 (0.2) Tax-equivalent NII after provision for loan loss (1) 48,229 45,238 6.6 Investment Securities gains (losses) (8) 284 (102.8) Impairment losses on securities (331) (3,940) (91.6) Non-interest income-excluding securities losses 27,929 29,951 (6.8) Non-interest expense 63,463 60,524 4.9 Non-interest expense-excluding non- core charges 63,400 60,524 4.8 One time acquisition related charges 63 - NM Income taxes 3,004 2,667 12.6 Net Income 8,109 7,194 12.7 Dividends Declared on Preferred Shares (1,850) (1,850) - Accretion on Preferred Shares (171) (160) 6.9 Net Income Applicable to Common Shares 6,088 5,184 17.4 Core operating earnings (2) 8,150 7,194 13.3 Tax equivalent adjustment (1) 1,243 1,148 8.3 ----------------------------- ----- ----- --- At Period End Assets Earning assets Loans Allowance for loan losses Deposits Stockholders' equity -------------------- Average Balances Assets 2,054,808 2,025,233 1.5 Earning assets 1,836,322 1,822,273 0.8 Deposits and interest-bearing liabilities 1,800,749 1,774,772 1.5 Loans 1,538,388 1,600,725 (3.9) Deposits 1,590,194 1,547,339 2.8 Stockholders' equity 238,795 232,719 2.6 Stockholders' equity / assets 11.62% 11.49% 1.1 ----------------------------- ----- ----- --- Per Common Share Data Net Income Basic $0.75 $0.64 17.2 Diluted 0.75 0.63 19.0 Core operating earnings (2) Basic $0.75 $0.64 18.2 Diluted 0.75 0.63 18.9 Dividends - 0.30 (100.0) Market Value: High $14.85 $18.93 (21.6) Low 8.53 3.76 126.9 Close 11.90 11.29 5.4 Book Value 25.00 24.26 3.1 Tangible Book Value 17.16 16.44 4.4 Shares outstanding, end of period (000) 8,118 8,118 - --------------------------------------- ----- ----- --- Performance Ratios (annualized) Tax-equivalent net interest margin (1) 3.89% 3.76% 3.7 Return on average assets -GAAP 0.39% 0.36% 11.1 Return on average equity- GAAP 3.40% 3.09% 9.9 Efficiency ratio (2) -GAAP 63.89% 61.50% 3.9 Effective tax rate 27.03% 27.05% (0.1) Dividend payout ratio (basic) 0.00% 46.09% (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 Non-GAAP Disclosure Reconciliations First Defiance Financial Corp. Management believes that the presentation of the non-GAAP financial measures in this release assists investors when comparing results period-to-period in a more meaningful and consistent manner and provides a better measure of results for First Defiance's ongoing operations. Core operating earnings are net income adjusted to exclude discontinued operations, merger, integration and restructuring expenses and the results of certain significant transactions not representative of ongoing operations. Three months Twelve Months ended Ended Core Operating Earnings December 31, December 31, ------------ ------------ (dollars in thousands, except per share data) 2010 2009 2010 2009 ----------------------- ---- ---- ---- ---- Net Income $2,268 $555 $8,109 $7,194 Acquisition related charges 10 - 63 - Tax effect (4) - (22) - --- --- --- --- After-tax non-operating items 6 - 41 - --- --- --- --- Core operating earnings $2,274 $555 $8,150 $7,194 ====== ==== ====== ====== Acquisition related charges in 2010 reflect charges associated with the purchase of the group benefits business from Andres, O'Neil & Lowe. Core operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, non-operating items are deducted from non-interest expense in the numerator and non-interest income in the denominator of the core operating efficiency ratio disclosed in the tables. Comparable information on a GAAP basis is also provided in the tables. Income from Mortgage Banking Revenue from sales and servicing of mortgage loans consisted of the following: Three months Twelve Months ended Ended December 31, December 31, ------------ ------------ (dollars in thousands) 2010 2009 2010 2009 ---------------------- ---- ---- ---- ---- Gain from sale of mortgage loans $1,755 $1,468 $7,017 $8,744 Mortgage loan servicing revenue (expense): Mortgage loan servicing revenue 856 751 $3,119 2,860 Amortization of mortgage servicing rights (1,008) (546) $(2,642) (3,171) Mortgage servicing rights valuation adjustments 1,130 397 $353 1,314 ----- --- ----- 978 602 830 1,003 --- --- --- ----- Total revenue from sale and servicing of mortgage loans $2,733 $2,070 $7,847 $9,747 ====== ====== ====== ====== Yield Analysis First Defiance Financial Corp. Three Months Ended December 31, ------------------------------- (dollars in thousands) ---------------------- 2010 ---- Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,496,374 $21,559 5.72% Securities 161,638 1,786 4.45% Interest Bearing Deposits 164,822 105 0.25% FHLB stock 21,372 201 3.73% ------ --- Total interest-earning assets 1,844,206 23,651 5.09% Non-interest-earning assets 219,759 Total assets $2,063,965 ========== Deposits and Interest- bearing liabilities: Interest bearing deposits $1,376,081 $4,030 1.16% FHLB advances and other 116,889 1,086 3.69% Other Borrowings 50,992 126 0.98% Subordinated debentures 36,223 332 3.64% ------ --- Total interest-bearing liabilities 1,580,185 5,574 1.40% Non-interest bearing deposits 225,435 - - ------- --- Total including non- interest-bearing demand deposits 1,805,620 5,574 1.22% Other non-interest- bearing liabilities 16,443 ------ Total liabilities 1,822,063 Stockholders' equity 241,902 Total liabilities and stockholders' equity $2,063,965 ========== Net interest income; interest rate spread $18,077 3.69% ======= ==== Net interest margin (3) 3.89% ==== Average interest- earning assets to average interest bearing liabilities 117% === Three Months Ended December 31, ------------------------------- (dollars in thousands) ---------------------- 2009 ---- Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,600,265 $23,517 5.83% Securities 134,575 1,628 4.82% Interest Bearing Deposits 96,185 60 0.25% FHLB stock 21,376 229 4.25% ------ --- Total interest-earning assets 1,852,401 25,434 5.45% Non-interest-earning assets 205,818 Total assets $2,058,219 ========== Deposits and Interest- bearing liabilities: Interest bearing deposits $1,383,370 $5,896 1.69% FHLB advances and other 146,930 1,249 3.37% Other Borrowings 49,649 137 1.09% Subordinated debentures 36,112 332 3.65% ------ --- Total interest-bearing liabilities 1,616,061 7,614 1.87% Non-interest bearing deposits 189,029 - - ------- --- Total including non- interest-bearing demand deposits 1,805,090 7,614 1.67% Other non-interest- bearing liabilities 17,977 ------ Total liabilities 1,823,067 Stockholders' equity 235,152 Total liabilities and stockholders' equity $2,058,219 ========== Net interest income; interest rate spread $17,820 3.58% ======= ==== Net interest margin (3) 3.82% ==== Average interest-earning assets to average interest bearing liabilities 115% === Twelve Months Ended December 31, -------------------------------- 2010 ---- Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,538,388 $88,775 5.77% Securities 154,648 7,151 4.71% Interest Bearing Deposits 121,911 303 0.25% FHLB stock 21,375 879 4.11% ------ --- Total interest-earning assets 1,836,322 97,108 5.29% Non-interest-earning assets 218,486 Total assets $2,054,808 ========== Deposits and Interest- bearing liabilities: Interest bearing deposits $1,389,330 $19,222 1.38% FHLB advances and other 127,281 4,711 3.70% Other Borrowings 47,046 455 0.97% Subordinated debentures 36,228 1,314 3.63% ------ ----- Total interest-bearing liabilities 1,599,885 25,702 1.61% Non-interest bearing deposits 200,864 - - ------- --- Total including non- interest-bearing demand deposits 1,800,749 25,702 1.43% Other non-interest-bearing liabilities 15,264 ------ Total liabilities 1,816,013 Stockholders' equity 238,795 Total liabilities and stockholders' equity $2,054,808 ========== Net interest income; interest rate spread $71,406 3.68% ======= ==== Net interest margin (3) 3.89% ==== Average interest-earning assets to average interest bearing liabilities 115% === Twelve Months Ended December 31, -------------------------------- 2009 ---- Average Yield Balance Interest(1) Rate(2) Interest-earning assets: Loans receivable $1,600,725 $93,850 5.86% Securities 128,806 6,773 5.23% Interest Bearing Deposits 71,366 149 0.21% FHLB stock 21,376 955 4.47% ------ --- Total interest-earning assets 1,822,273 101,727 5.58% Non-interest-earning assets 202,960 Total assets $2,025,233 ========== Deposits and Interest- bearing liabilities: Interest bearing deposits $1,370,826 $26,102 1.90% FHLB advances and other 146,978 5,114 3.48% Other Borrowings 44,247 570 1.29% Subordinated debentures 36,208 1,471 4.06% ------ ----- Total interest-bearing liabilities 1,598,259 33,257 2.08% Non-interest bearing deposits 176,513 - - ------- --- Total including non- interest-bearing demand deposits 1,774,772 33,257 1.87% Other non-interest- bearing liabilities 17,742 ------ Total liabilities 1,792,514 Stockholders' equity 232,719 Total liabilities and stockholders' equity $2,025,233 ========== Net interest income; interest rate spread $68,470 3.50% ======= ==== Net interest margin (3) 3.76% ==== Average interest-earning assets to average interest bearing liabilities 114% === (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 data) 4th Qtr 2010 3rd Qtr 2010 2nd Qtr 2010 ----------------------- ------------ ------------ ------------ Summary of Operations Tax-equivalent interest income (1) $23,651 $24,373 $24,655 Interest expense 5,574 6,295 6,788 Tax-equivalent net interest income (1) 18,077 18,078 17,867 Provision for loan losses 5,652 5,196 5,440 Tax-equivalent NII after provision for loan losses (1) 12,425 12,882 12,427 Investment securities gains (losses) (14) (190) (71) Non-interest income (excluding securities gains/losses) 7,568 7,669 5,862 Non-interest expense 16,485 17,102 15,045 Income taxes 904 668 808 Net income 2,268 2,275 2,059 Dividends Declared on Preferred Shares (463) (463) (462) Accretion on Preferred Shares (43) (43) (42) Net Income (Loss) Applicable to Common Shares 1,762 1,769 1,555 Tax equivalent adjustment (1) 322 316 306 ------------------------- --- --- --- At Period End Total assets $2,036,511 $2,042,239 $2,038,656 Earning assets 1,867,733 1,866,939 1,858,300 Loans 1,519,503 1,549,677 1,571,413 Allowance for loan losses 41,080 41,343 38,852 Deposits 1,575,419 1,590,648 1,580,520 Stockholders' equity 240,331 241,029 238,438 Stockholders' equity / assets 11.80% 11.80% 11.70% Goodwill 57,556 57,556 57,556 -------- ------ ------ ------ Average Balances Total assets $2,063,965 $2,045,835 $2,060,925 Earning assets 1,844,206 1,823,911 1,845,306 Deposits and interest- bearing liabilities 1,805,620 1,790,022 1,808,944 Loans 1,496,374 1,545,378 1,551,396 Deposits 1,601,516 1,585,300 1,597,820 Stockholders' equity 241,902 240,709 237,076 Stockholders' equity / assets 11.72% 11.77% 11.50% ---------------------- ----- ----- ----- Per Common Share Data Net Income: Basic $0.22 $0.22 $0.19 Diluted 0.22 0.22 0.19 Dividends 0.00 0.00 0.00 Market Value: High $12.32 $10.63 $14.85 Low 9.94 8.55 8.53 Close 11.90 10.06 8.94 Book Value 25.00 25.10 24.78 Shares outstanding, end of period (in thousands) 8,118 8,118 8,118 -------------------------- ----- ----- ----- Performance Ratios (annualized) Tax-equivalent net interest margin (1) 3.89% 3.94% 3.89% Return on average assets 0.44% 0.44% 0.40% Return on average equity 3.72% 3.75% 3.48% Efficiency ratio (2) 64.28% 66.42% 63.40% Effective tax rate 28.50% 22.70% 28.18% Common dividend payout ratio (basic) 0.00% 0.00% 0.00% ---------------------------- ---- ---- ---- (dollars in thousands, except per share data) 1st Qtr 2010 4th Qtr 2009 --------------------------------- ------------ ------------ Summary of Operations Tax-equivalent interest income (1) $24,427 $25,434 Interest expense 7,044 7,614 Tax-equivalent net interest income (1) 17,383 17,820 Provision for loan losses 6,889 8,470 Tax-equivalent NII after provision for loan losses (1) 10,494 9,350 Investment securities gains (losses) (64) (1,394) Non-interest income (excluding securities gains/losses) 6,830 6,970 Non-interest expense 14,832 14,609 Income taxes 624 (525) Net income 1,506 555 Dividends Declared on Preferred Shares (463) (447) Accretion on Preferred Shares (40) (41) Net Income (Loss) Applicable to Common Shares 1,003 67 Tax equivalent adjustment (1) 298 287 ----------------------------- --- --- At Period End Total assets $2,058,775 $2,057,523 Earning assets 1,884,650 1,879,725 Loans 1,576,602 1,617,122 Allowance for loan losses 38,980 36,547 Deposits 1,599,584 1,580,226 Stockholders' equity 235,655 234,086 Stockholders' equity / assets 11.45% 11.38% Goodwill 56,585 56,585 -------- ------ ------ Average Balances Total assets $2,048,506 $2,058,219 Earning assets 1,831,867 1,852,401 Deposits and interest-bearing liabilities 1,798,408 1,805,090 Loans 1,560,405 1,600,265 Deposits 1,576,140 1,572,399 Stockholders' equity 235,492 235,152 Stockholders' equity / assets 11.50% 11.43% ----------------------------- ----- ----- Per Common Share Data Net Income: Basic $0.12 $0.01 Diluted 0.12 0.01 Dividends 0.00 0.00 Market Value: High $12.33 $18.93 Low 9.20 10.06 Close 10.12 11.29 Book Value 24.45 24.26 Shares outstanding, end of period (in thousands) 8,117 8,118 --------------------------------- ----- ----- Performance Ratios (annualized) Tax-equivalent net interest margin (1) 3.85% 3.82% Return on average assets 0.30% 0.11% Return on average equity 2.59% 0.94% Efficiency ratio (2) 61.26% 58.93% Effective tax rate 29.30% -1750.00% Common dividend payout ratio (basic) 0.00% 0.00% ---------------------------- ---- ---- (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. Selected Quarterly Information First Defiance Financial Corp. (dollars in thousands, except per share data) 4th Qtr 2010 3rd Qtr 2010 2nd Qtr 2010 ----------------------- ------------ ------------ ------------ Loan Portfolio Composition One to four family residential real estate $209,590 $213,574 $217,603 Construction 32,497 31,722 43,333 Commercial real estate 764,447 776,972 790,521 Commercial 369,530 372,583 364,281 Consumer finance 23,027 27,060 28,961 Home equity and improvement 133,412 137,747 140,969 ------- ------- ------- Total loans 1,532,503 1,559,658 1,585,668 Less: Loans in process 12,080 9,030 13,283 Deferred loan origination fees 920 951 972 Allowance for loan loss 41,080 41,343 38,852 Net Loans $1,478,423 $1,508,334 $1,532,561 ========== ========== ========== Allowance for loan loss activity Beginning allowance 41,343 38,852 38,980 Provision for loan losses 5,652 5,196 5,440 Credit loss charge- offs: One to four family residential real estate 483 1,164 1,135 Commercial real estate 4,806 688 1,243 Commercial 388 842 3,153 Consumer finance 55 28 16 Home equity and improvement 347 148 156 --- --- --- Total charge-offs 6,079 2,870 5,703 Total recoveries 164 165 135 --- --- --- Net charge-offs (recoveries) 5,915 2,705 5,568 Ending allowance $41,080 $41,343 $38,852 ======= ======= ======= Credit Quality Non-accrual loans $41,040 $37,377 $31,804 Restructured loans, accruing 6,062 8,784 8,918 ----- ----- ----- Total non-performing loans (1) 47,102 46,161 40,722 Real estate owned (REO) 9,591 11,127 12,735 Total non-performing assets (2) $56,693 $57,288 $53,457 ======= ======= ======= Net charge-offs 5,915 2,705 5,568 Allowance for loan losses /loans 2.70% 2.67% 2.47% Allowance for loan losses /non- performing assets 72.46% 72.17% 72.68% Allowance for loan losses /non- performing loans 87.21% 89.56% 95.41% Non-performing assets / loans plus REO 3.71% 3.67% 3.37% Non-performing assets / total assets 2.78% 2.81% 2.62% Net charge-offs / average loans (annualized) 1.58% 0.70% 1.44% Deposit Balances Non-interest-bearing demand deposits $216,699 $213,414 $190,140 Interest-bearing demand deposits and money market 555,434 543,539 517,170 Savings deposits 144,491 141,190 140,473 Retail time deposits less than $100,000 465,774 485,777 527,421 Retail time deposits greater than $100,000 151,258 161,413 158,069 National/Brokered time deposits 41,763 45,315 47,247 Total deposits $1,575,419 $1,590,648 $1,580,520 ========== ========== ========== (dollars in thousands, except per share data) 1st Qtr 2010 4th Qtr 2009 --------------------------------- ------------ ------------ Loan Portfolio Composition One to four family residential real estate $222,099 $227,592 Construction 46,369 48,626 Commercial real estate 797,449 806,889 Commercial 352,923 379,408 Consumer finance 31,718 34,105 Home equity and improvement 144,826 147,977 ------- ------- Total loans 1,595,384 1,644,597 Less: Loans in process 17,794 26,494 Deferred loan origination fees 988 981 Allowance for loan loss 38,980 36,547 Net Loans $1,537,622 $1,580,575 ========== ========== Allowance for loan loss activity Beginning allowance 36,547 31,248 Provision for loan losses 6,889 8,470 Credit loss charge-offs: One to four family residential real estate 326 884 Commercial real estate 3,191 1,912 Commercial 735 354 Consumer finance 25 75 Home equity and improvement 399 134 --- --- Total charge-offs 4,676 3,359 Total recoveries 220 188 --- --- Net charge-offs (recoveries) 4,456 3,171 Ending allowance $38,980 $36,547 ======= ======= Credit Quality Non-accrual loans $33,567 $41,191 Restructured loans, accruing 7,023 6,715 ----- ----- Total non-performing loans (1) 40,590 47,906 Real estate owned (REO) 12,768 13,527 Total non-performing assets (2) $53,358 $61,433 ======= ======= Net charge-offs 4,456 3,171 Allowance for loan losses / loans 2.47% 2.26% Allowance for loan losses /non- performing assets 73.05% 59.49% Allowance for loan losses /non- performing loans 96.03% 76.29% Non-performing assets / loans plus REO 3.36% 3.77% Non-performing assets / total assets 2.59% 2.99% Net charge-offs /average loans (annualized) 1.14% 0.79% Deposit Balances Non-interest-bearing demand deposits $187,231 $189,132 Interest-bearing demand deposits and money market 525,311 499,575 Savings deposits 138,364 130,156 Retail time deposits less than $100,000 539,313 550,172 Retail time deposits greater than $100,000 161,071 163,838 National/Brokered time deposits 48,294 47,353 Total deposits $1,599,584 $1,580,226 ========== ========== (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. (dollars 30 to 89 in days past Non Accrual Troubled Debt thousands) Total Balance Current due Loans Restructuring ----------- ------------- ------- --------- ----------- ------------- December 31, 2010 --------- One to four family residential real estate $209,590 $195,699 $3,371 $7,232 $3,288 Construction 32,497 32,433 - 64 - Commercial real estate 764,447 737,621 2,942 21,737 2,147 Commercial 369,530 355,654 1,983 11,547 346 Consumer finance 23,027 22,714 299 14 - Home equity and improvement 133,412 130,165 2,520 446 281 ------- ------- Total loans 1,532,503 $1,474,286 $11,115 $41,040 $6,062 ========= ========== ======= ======= ====== September 30, 2010 --------- One to four family residential real estate $213,574 $200,573 $2,483 $6,589 $3,929 Construction 31,722 31,553 - 169 - Commercial real estate 776,972 745,663 3,420 23,421 4,468 Commercial 372,583 364,958 318 6,955 352 Consumer finance 27,060 26,842 184 34 - Home equity and improvement 137,747 135,825 1,678 209 35 ------- ------- Total loans $1,559,658 $1,505,414 $8,083 $37,377 $8,784 ========== ========== ====== ======= ====== June 30, 2010 -------- One to four family residential real estate $217,603 $202,472 $4,790 $6,457 $3,884 Construction 43,333 43,079 - 254 - Commercial real estate 790,521 763,913 4,057 17,912 4,639 Commercial 364,281 356,500 508 6,898 375 Consumer finance 28,961 28,767 177 17 - Home equity and improvement 140,969 139,219 1,464 266 20 ------- Total loans $1,585,668 $1,533,950 $10,996 $31,804 $8,918 ========== ========== ======= ======= ====== December 31, 2009 --------- One to four family residential real estate $227,592 $215,209 $4,333 $5,349 $2,701 Construction 48,625 47,950 - 675 - Commercial real estate 806,890 775,604 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 $1,585,505 $11,186 $41,191 $6,715 ========== ========== ======= ======= ======
First Defiance Financial Corp.
CONTACT: William J. Small, Chairman, President and CEO, +1-419-782-5015,
bsmall@first-fed.com
Web Site: http://www.fdef.com/
