First Defiance Financial Corp. Announces 2017 Second Quarter Earnings

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First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the second quarter ended June 30, 2017, totaled $8.3 million, or $0.82 per diluted common share compared to $7.3 million or $0.80 per diluted common share for the quarter ended June 30, 2016. The second quarter 2017 includes the results from the operations of Commercial Bancshares, Inc. and its banking subsidiary Commercial Savings Bank (collectively “CSB”) following their acquisition on February 24, 2017, and Corporate One Benefits Agency, Inc. (“Corporate One”) acquired April 1, 2017.

“Our second quarter financial results clearly reflect the expected operating performance enhancements from our recent acquisitions as compared to the second quarter last year revenues grew 24.3%, the net interest margin was 3.89% up from 3.71%, and the efficiency ratio improved to 59.0% from 61.5%,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “While higher charge-offs for credit losses partially offset these improvements in the second quarter, we expect the benefits from our mergers to continue elevating our ongoing performance.”

Net Interest Income up Compared to Second Quarter 2016

Net interest income of $24.6 million in the second quarter of 2017 was up from $19.4 million in the second quarter of 2016. The increase was mostly attributable to a full quarter of operations from the CSB merger, but also included recovered interest and prepayment penalties totaling $307,000 compared to $119,000 in the second quarter last year. Net interest margin was 3.89% for the second quarter of 2017, up from 3.81% in the first quarter of 2017, and up from 3.71% in the second quarter of 2016. Yield on interest earning assets increased by 23 basis points, to 4.33% in the second quarter of 2017 from 4.10% in the second quarter of 2016. The cost of interest-bearing liabilities increased by 7 basis points in the second quarter of 2017 to 0.58% from 0.51% in the second quarter of 2016.

“Strong growth in our net interest income was driven by the successful Commercial Bancshares merger, our solid organic growth over the last year and our steady net interest margin,” said Hileman. “The combination of these factors generated net interest income growth of $5.2 million or 27.0% over the second quarter last year.”

Non-Interest Income up from Second Quarter 2016

First Defiance’s non-interest income for the second quarter of 2017 was $10.1 million compared with $8.6 million in the second quarter of 2016. The increase in total non-interest income was largely due to the inclusion of operations from the CSB and Corporate One mergers completed in 2017. In addition, the second quarter of 2017 included gains of $267,000 from the sale of securities compared to gains of $227,000 in the second quarter of 2016.

Mortgage banking income was $1.8 million in the second quarter of 2017, even with $1.8 million in the second quarter of 2016. Mortgage originations totaled $64.2 million in the second quarter of 2017, up seasonally from the first quarter of 2017 but down from $76.0 million in the same quarter last year. Gains from the sale of mortgage loans decreased in the second quarter of 2017 to $1.3 million from $1.4 million in the second quarter of 2016. Mortgage loan servicing revenue was $924,000 in the second quarter of 2017, up slightly from $876,000 in the second quarter of 2016. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $16,000 in the second quarter of 2017 compared with a negative adjustment of $104,000 in the second quarter of 2016. In addition, gains on the sale of non-mortgages, which include SBA and FSA loans, totaled $90,000 in the second quarter 2017 compared to $411,000 in the second quarter 2016.

For the second quarter of 2017, commissions from the sale of insurance products were $3.3 million, up from $2.5 million in the second quarter of 2016 primarily due to added commissions from the Corporate One merger. Service fees and other charges were $3.2 million in the second quarter of 2017, up from $2.8 million in the second quarter of 2016. Trust income was $464,000 in the second quarter of 2017, up 13.4% from $409,000 in the second quarter of 2016. Other non-interest income was $612,000 in the second quarter of 2017, up from $231,000 in the second quarter of 2016 mainly due to gains from the sale of real estate owned and sales of investments.

“Non-interest income growth this quarter reflects our expanding operations and the contributions from our recent mergers. Insurance commissions and bank service fees had strong gains compared to the second quarter last year, more than offsetting the decline in the gain on sale of non-mortgage loans,” continued Hileman. “Overall total non-interest income, excluding securities gains, increased 18.3% over this same period in the prior year.”

Non-Interest Expenses up from Second Quarter 2016

Total non-interest expense was $20.6 million in the second quarter of 2017, an increase from $17.3 million in the second quarter of 2016. The increase in non-interest expenses was mostly due to the additional expenses for the operations of CSB and Corporate One mergers completed in 2017. Compensation and benefits increased to $11.5 million in the second quarter of 2017, compared to $9.8 million in the second quarter of 2016. Both occupancy expense and data processing equaled $2.0 million, up from $1.8 million and $1.6 million, respectively, in the second quarter of 2016. Other non-interest expense of $4.0 million in the second quarter of 2017 was up from $3.2 million in the second quarter of 2016, which included $299,000 of merger related transaction costs recorded in the second quarter of 2017.

Credit Quality

Non-performing loans totaled $30.4 million at June 30, 2017, an increase from $16.4 million at June 30, 2016. The increase was mainly attributable to two loan relationships totaling $13.6 million that were downgraded in the second quarter. In addition, First Defiance had $672,000 of real estate owned at June 30, 2017, compared to $1.1 million at June 30, 2016. Accruing troubled debt restructured loans were $10.5 million at June 30, 2017, compared with $9.6 million at June 30, 2016.

As a result of the loan downgrades, the second quarter 2017 results include net charge-offs of $2.0 million and a provision for loan losses of $2.1 million compared with net recoveries $227,000 and a provision of $53,000 for the same period in 2016.

The allowance for loan loss as a percentage of total loans was 1.15% at June 30, 2017, compared with 1.15% at March 31, 2017 and 1.39% at June 30, 2016. The decrease in the allowance for loan loss as a percentage of total loans was primarily attributable to the CSB acquisition. The CSB loans acquired were recorded at fair value with purchase accounting adjustments discounting the loan balance instead of an allowance for loan losses. For the CSB loans acquired, the discount recorded totaled $5.0 million, or 1.7% of acquired CSB loans at June 30, 2017.

“We were very disappointed in the loan downgrades and the rise in non-performing loan totals this quarter,” said Hileman. “After closely reviewing these situations, we remain confident in our lending and credit management practices. We believe that our overall asset quality is sound and that we will regain our improved position in the quarters ahead.”

Year-To-Date Results

For the six-month period ended June 30, 2017, net income totaled $13.5 million, or $1.37 per diluted common share, compared to $14.4 million, or $1.59 per diluted common share for the six months ended June 30, 2016. The first six months of 2017 includes the results from the operations of the CSB acquisition completed on February 24, 2017 and Corporate One acquired on April 1, 2017. In addition, the first six months of 2017 includes merger and conversion expenses related to the acquisitions of $3.9 million, which had an after tax impact of $2.8 million, or $0.28 per diluted share.

Net interest income was $46.3 million for the first six months of 2017 compared with $38.6 million in the first six months of 2016. Average interest-earning assets increased to $2.47 billion in the first six months of 2017 compared to $2.13 billion in the first six months of 2016. Net interest margin for the first six months of 2017 was 3.86%, up 11 basis points from the 3.75% margin reported in the six month period ended June 30, 2016.

The provision for loan losses in the first six months of 2017 was $2.2 million compared to $417,000 recorded during the first six months of 2016.

Non-interest income for the first six months of 2017 was $20.7 million compared to $17.2 million during the same period of 2016. The first six months of 2017 includes the operating results from the CSB and Corporate One mergers completed in 2017 and a $1.5 million enhancement value gain related to the purchase of bank owned life insurance in the first quarter of 2017.

Service fees and other charges were $5.9 million for the first six months of 2017, up from $5.4 million during the same period of 2016. Mortgage banking income was $3.6 million for the first six months of 2017 compared with $3.3 million during the same period of 2016. Insurance commissions rose to $6.8 million for the first six months of 2017 compared with $5.6 million for the same period of 2016. Non-interest income for the first six months of 2017 included $267,000 of gains from the sale of securities compared with securities gains of $358,000 during the same period of 2016.

Non-interest expense was $43.8 million for the first six months of 2017, up from $34.6 million for the same period of 2016. Compensation and benefits expense was $25.8 million for the first six months of 2017 compared with $20.0 million during the same period of 2016. Expenses also included increases in occupancy of $178,000, data processing of $857,000, amortization of intangibles of $263,000 and other expenses of $1.9 million.

Total Assets at $2.9 Billion

Total assets at June 30, 2017, were $2.89 billion compared to $2.48 billion at December 31, 2016, and $2.41 billion at June 30, 2016. The increase reflected at June 30, 2017 is primarily due to the acquisition of CSB effective February 24, 2017, which added $368.3 million to total assets, net of $12.3 million paid in cash, at consummation.

Net loans receivable (excluding loans held for sale) were $2.23 billion at June 30, 2017, compared to $1.91 billion at December 31, 2016, and $1.86 billion at June 30, 2016. The acquisition of CSB added $285.4 million to the loan portfolio. At June 30, 2017, excluding the CSB acquired loans, net loans receivable grew $107.3 million, or 5.8% from a year ago.

Also, at June 30, 2017, goodwill and other intangible assets totaled $104.5 million compared to $63.1 million at December 31, 2016, and $63.4 million at June 30, 2016. The increase in 2017 was attributable to the acquisitions of CSB and Corporate One which together added $41.9 to goodwill and intangibles.

Total deposits at June 30, 2017, were $2.33 billion compared with $1.98 billion at December 31, 2016, and $1.92 billion at June 30, 2016. The acquisition of CSB added $308.0 million to total deposits. At June 30, 2017, excluding the CSB acquired deposits, total deposits grew $98.4 million, or 5.1% from a year ago.

Total stockholders’ equity was $361.4 million at June 30, 2017, compared to $293.0 million at December 31, 2016, and $286.6 million at June 30, 2016. The acquisition of CSB in 2017 added $56.5 million to total equity.

Dividend to be Paid August 25

The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable August 25, 2017, to shareholders of record at the close of business on August 18, 2017. The dividend represents an annual dividend of 1.90 percent based on the First Defiance common stock closing price on July 14, 2017. First Defiance has approximately 10,148,821 common shares outstanding.

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, July 18, 2017, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. In addition, a live webcast may be accessed at http://services.choruscall.com/links/fdef170718.html.

The replay of the conference call Webcast will be available at www.fdef.com until July 18, 2018, at 9:00 a.m. ET.

First Defiance Financial Corp.

First Defiance Financial Corp. (NASDAQ:FDEF), headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest, First Insurance Group and Corporate One Benefits. First Federal Bank operates 42 full-service branches and numerous ATM locations in northwest and central Ohio, southeast Michigan and northeast Indiana. First Insurance Group, including its division Corporate One Benefits, is a full-service insurance agency with ten offices throughout northwest Ohio.

For more information, visit the company’s Web site at 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 real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which First Defiance and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2016. One or more of these factors have affected or could in the future affect First Defiance's business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by First Defiance or any other persons, that our objectives and plans will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of First Defiance. We assume no obligation to update any forward-looking statements.

As required by U.S. GAAP, First Defiance will evaluate the impact of subsequent events through the issuance date of its June 30, 2017 consolidated financial statements as part of its Quarterly Report on Form 10-Q to be filed with the SEC. Accordingly, subsequent events could occur that may cause First Defiance to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

   
Consolidated Balance Sheets (Unaudited)
First Defiance Financial Corp.
 
June 30, December 31,
(in thousands)   2017   2016
 
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions $ 51,941 $ 53,003
Interest-bearing deposits   60,000     46,000  
111,941

 

99,003
Securities

 

Available-for sale, carried at fair value 257,575

 

250,992
Held-to-maturity, carried at amortized cost   733     184  
258,308 251,176
 
Loans 2,254,435 1,940,487
Allowance for loan losses   (25,915 )   (25,884 )
Loans, net 2,228,520 1,914,603
Loans held for sale 7,939 9,607
Mortgage servicing rights 9,680 9,595
Accrued interest receivable 8,376 6,760
Federal Home Loan Bank stock 15,992 13,798
Bank Owned Life Insurance 65,390 52,817
Office properties and equipment 42,588 36,958
Real estate and other assets held for sale 672 455
Goodwill 98,065 61,798
Core deposit and other intangibles 6,425 1,336
Deferred Taxes - 2,212
Other assets   36,045     17,479  
Total Assets $ 2,889,941   $ 2,477,597  
 
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits $ 520,778 $ 487,663
Interest-bearing deposits   1,805,924     1,493,965  
Total deposits 2,326,702 1,981,628
Advances from Federal Home Loan Bank 104,830 103,943
Notes payable and other interest-bearing liabilities 30,606 31,816
Subordinated debentures 36,083 36,083
Advance payments by borrowers for tax and insurance 2,305 2,650
Deferred taxes 21 -
Other liabilities   27,964     28,459  
Total Liabilities 2,528,511 2,184,579
Stockholders’ Equity
Preferred stock - -
Common stock, net 127 127
Additional paid-in-capital 160,404 126,390
Accumulated other comprehensive income 2,745 215
Retained earnings 249,196 240,592
Treasury stock, at cost   (51,042 )   (74,306 )
Total stockholders’ equity   361,430     293,018  
Total Liabilities and Stockholders’ Equity $ 2,889,941   $ 2,477,597  
 
                 
Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
  Three Months Ended   Six Months Ended
June 30, June 30,
(in thousands, except per share amounts)   2017   2016 2017   2016
Interest Income:    
Loans $ 25,318 $ 19,666 $ 47,288 $ 38,978
Investment securities 1,752 1,543 3,507 3,173
Interest-bearing deposits 201 134 346 183
FHLB stock dividends   187   137   353   276
Total interest income 27,458 21,480 51,494 42,610
Interest Expense:

 

Deposits 2,170 1,545 3,966 2,978
FHLB advances and other 414 321 780 618
Subordinated debentures 229 182 443 357
Notes Payable   13   36   28   73
Total interest expense   2,826   2,084   5,217   4,026
Net interest income 24,632 19,396 46,277 38,584
Provision for loan losses   2,118   53   2,172   417

Net interest income after provision for loan losses

22,514 19,343 44,105 38,167
Non-interest Income:
Service fees and other charges 3,161 2,799 5,920 5,443
Mortgage banking income 1,830 1,764 3,568 3,303
Gain on sale of non-mortgage loans 90 411 90 456
Gain on sale of securities 267 227 267 358
Insurance commissions 3,294 2,504 6,752 5,640
Trust income 464 409 914 836
Income from Bank Owned Life Insurance 422 230 2,245 461
Other non-interest income   612   231   933   714
Total Non-interest Income 10,140 8,575 20,689 17,211
Non-interest Expense:
Compensation and benefits 11,473 9,770 25,808 19,955
Occupancy 1,954 1,828 3,791 3,613
FDIC insurance premium 353 329 643 656
Financial institutions tax 535 447 1,014 893
Data processing 2,019 1,641 3,958 3,101
Amortization of intangibles 334 147 567 304
Other non-interest expense   3,962   3,185   7,991   6,099
Total Non-interest Expense   20,630   17,347   43,772   34,621
Income before income taxes 12,024 10,571 21,022 20,757
Income taxes   3,677   3,307   7,534   6,324
Net Income $ 8,347 $ 7,264 $ 13,488 $ 14,433
 
 
Earnings per common share:
Basic $ 0.82 $ 0.81 $ 1.38 $ 1.61
Diluted $ 0.82 $ 0.80 $ 1.37 $ 1.59
 
Average Shares Outstanding:
Basic 10,147 8,968 9,793 8,981
Diluted 10,206 9,036 9,850 9,050
 
                             
Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.
  Three Months Ended       Six Months Ended
June 30, June 30,
(dollars in thousands, except per share data)   2017   2016   % change       2017   2016   % change
Summary of Operations        
 
Tax-equivalent interest income (1) $ 27,944 $ 21,940 27.4 % $ 52,450 $ 43,545 20.5 %
Interest expense 2,826 2,084 35.6 5,217 4,026 29.6
Tax-equivalent net interest income (1) 25,118 19,856 26.5 47,233 39,519 19.5
Provision for loan losses 2,118 53 NM 2,172 417 NM
Tax-equivalent NII after provision for loan loss (1) 23,000 19,803 16.1 45,061 39,102 15.2
Investment Securities gains 267 227 NM 267 358 NM
Non-interest income (excluding securities gains/losses) 9,873 8,348 18.3 20,422 16,853 21.2
Non-interest expense 20,630 17,347 18.9 43,772 34,621 26.4
Income taxes 3,677 3,307 11.2 7,534 6,324 19.1
Net Income 8,347 7,264 14.9 13,488 14,433 (6.5 )
Tax equivalent adjustment (1)     486       460     5.7           956       935     2.2  
At Period End
Assets 2,889,941 2,409,599 19.9
Earning assets 2,596,674 2,200,517 18.0
Loans 2,254,435 1,861,403 21.1
Allowance for loan losses 25,915 25,948 (0.1 )
Deposits 2,326,702 1,920,270 21.2
Stockholders’ equity     361,430       286,616     26.1                  
Average Balances
Assets 2,908,483 2,391,064 21.6 2,765,443 2,352,634 17.5
Earning assets 2,591,397 2,162,574 19.8 2,473,471 2,125,573 16.4
Loans 2,238,061 1,828,984 22.4 2,132,064 1,812,592 17.6
Deposits and interest-bearing liabilities 2,516,024 2,079,442 21.0 2,395,874 2,042,429 17.3
Deposits 2,346,336 1,903,139 23.3 2,227,986 1,869,242 19.2
Stockholders’ equity 357,523 282,573 26.5 335,983 280,812 19.6
Stockholders’ equity / assets     12.29 %     11.82 %   4.0           12.15 %     11.94 %   1.8  
Per Common Share Data
Net Income
Basic $ 0.82 $ 0.81 1.2 $ 1.38 $ 1.61 (14.3 )
Diluted 0.82 0.80 2.5 1.37 1.59 (13.8 )
Dividends 0.25 0.22 13.6 0.50 0.44 13.6
Market Value:
High $ 56.90 $ 41.21 38.1 $ 56.90 $ 41.21 38.1
Low 48.78 37.53 30.0 46.27 34.80 33.0
Close 52.68 38.85 35.6 52.68 38.85 35.6
Common Book Value 35.61 31.95 11.5 35.61 31.95 11.5
Tangible Common Book Value (1) 25.32 24.89 1.7 25.32 24.89 1.7
Shares outstanding, end of period (000)     10,149       8,971     13.1           10,149       8,971     13.1  
Performance Ratios (annualized)
Tax-equivalent net interest margin (2) 3.89 % 3.71 % 5.0 3.86 % 3.75 % 2.7
Return on average assets 1.15 % 1.22 % (5.8 ) 0.98 % 1.23 % (20.3 )
Return on average equity 9.36 % 10.34 % (9.4 ) 8.10 % 10.34 % (21.7 )
Efficiency ratio (3) 58.96 % 61.51 % (4.1 ) 64.70 % 61.42 % 5.3
Effective tax rate 30.58 % 31.28 % (2.2 ) 35.84 % 30.47 % 17.6
Dividend payout ratio (basic)     30.49 %     27.16 %   12.3           36.23 %     27.33 %   32.6  

(1)

 

Tangible common book value = total stockholders' equity less the sum of goodwill, core deposit and other intangibles, and preferred stock divided by shares outstanding at the end of the period.

(2)

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%

(3)

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 Six Months Ended
June 30, June 30,
(dollars in thousands)   2017   2016   2017   2016
 
Gain from sale of mortgage loans $ 1,293 $ 1,426 $ 2,377 $ 2,420
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue 924 876 1,858 1,753
Amortization of mortgage servicing rights (403 ) (434 ) (715 ) (745 )
Mortgage servicing rights valuation adjustments   16     (104 )   48     (125 )
  537     338     1,191     883  
Total revenue from sale and servicing of mortgage loans $ 1,830   $ 1,764   $ 3,568   $ 3,303  
 
                                 
Yield Analysis
First Defiance Financial Corp.
  Three Months Ended June 30,
(dollars in thousands)
2017       2016
Average     Yield Average     Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 2,238,061 $ 25,368 4.55% $ 1,828,984 $ 19,716 4.34%
Securities 259,619 2,188 3.42%

(3)

224,494 1,953 3.62%

(3)

Interest Bearing Deposits 77,725 201 1.04% 95,296 134 0.57%
FHLB stock   15,992   187 4.69%   13,800   137 3.99%
Total interest-earning assets 2,591,397 27,944 4.33% 2,162,574 21,940 4.10%
Non-interest-earning assets   317,086   228,490
Total assets $ 2,908,483 $ 2,391,064
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 1,785,895 $ 2,170 0.49% $ 1,463,086 $ 1,545 0.42%
FHLB advances and other 104,923 414 1.58% 84,506 321 1.53%
Subordinated debentures 36,156 229 2.54% 36,141 182 2.03%
Notes payable   28,609   13 0.18%   55,656   36 0.26%
Total interest-bearing liabilities 1,955,583 2,826 0.58% 1,639,389 2,084 0.51%
Non-interest bearing deposits   560,441   - -   440,053   - -
Total including non-interest-bearing demand deposits 2,516,024 2,826 0.45% 2,079,442 2,084 0.40%
Other non-interest-bearing liabilities   34,936   29,049
Total liabilities 2,550,960 2,108,491
Stockholders' equity   357,523   282,573
Total liabilities and stockholders' equity $ 2,908,483   $ 2,391,064  
Net interest income; interest rate spread $ 25,118 3.75% $ 19,856 3.59%
Net interest margin (4) 3.89% 3.71%
Average interest-earning assets to average interest bearing liabilities 133% 132%
 
Six Months Ended June 30,
2017 2016
Average Yield Average Yield
Balance Interest(1) Rate Balance Interest(1) Rate
Interest-earning assets:
Loans receivable $ 2,132,064 $ 47,390 4.48% $ 1,812,592 $ 39,079 4.34%
Securities 257,230 4,361 3.46% (3) 229,154 4,007 3.64%

(3)

Interest Bearing Deposits 68,904 346 1.01% 70,026 183 0.53%
FHLB stock   15,273   353 4.66%   13,801   276 4.02%
Total interest-earning assets 2,473,471 52,450 4.28% 2,125,573 43,545 4.13%
Non-interest-earning assets   291,972   227,061
Total assets $ 2,765,443 $ 2,352,634
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 1,706,318 $ 3,966 0.47% $ 1,441,783 $ 2,978 0.42%
FHLB advances and other 104,600 780 1.50% 81,598 618 1.52%
Subordinated debentures 36,153 443 2.46% 36,140 357 2.00%
Notes payable   27,135   28 0.21%   55,449   73 0.27%
Total interest-bearing liabilities 1,874,206 5,217 0.56% 1,614,970 4,026 0.50%
Non-interest bearing deposits   521,668   - -   427,459   - -
Total including non-interest-bearing demand deposits 2,395,874 5,217 0.44% 2,042,429 4,026 0.40%
Other non-interest-bearing liabilities   33,586   29,393
Total liabilities 2,429,460 2,071,822
Stockholders' equity   335,983   280,812
Total liabilities and stockholders' equity $ 2,765,443   $ 2,352,634  
Net interest income; interest rate spread $ 47,233 3.72% $ 39,519 3.63%
Net interest margin (4) 3.86% 3.75%
Average interest-earning assets to average interest bearing liabilities 132% 132%

(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)

Securities yield = annualized interest income divided by the average balance of securities, excluding average unrealized gains/losses.

(4)

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)   2nd Qtr 2017   1st Qtr 2017   4th Qtr 2016   3rd Qtr 2016   2nd Qtr 2016
Summary of Operations
Tax-equivalent interest income (1) $ 27,944 $ 24,505 $ 23,219 $ 22,449 $ 21,940
Interest expense 2,826 2,391 2,231 2,183 2,084
Tax-equivalent net interest income (1) 25,118 22,114 20,988 20,266 19,856
Provision for loan losses 2,118 55 (149 ) 15 53
Tax-equivalent NII after provision for loan losses (1) 23,000 22,059 21,137 20,251 19,803
Investment securities gains, net of impairment 267 - - 151 227
Non-interest income (excluding securities gains/losses) 9,873 10,549 8,293 8,375 8,348
Non-interest expense 20,630 23,142 18,180 18,292 17,347
Income taxes 3,677 3,857 3,436 2,994 3,307
Net income 8,347 5,140 7,365 7,045 7,264
Tax equivalent adjustment (1)     486       469       449       446       460  
At Period End
Total assets $ 2,889,941 $ 2,928,697 $ 2,477,151 $ 2,450,040 $ 2,409,599
Earning assets 2,596,674 2,639,325 2,261,068 2,240,747 2,200,517
Loans 2,254,435 2,238,006 1,940,487 1,925,694 1,861,403
Allowance for loan losses 25,915 25,749 25,884 25,923 25,948
Deposits 2,326,702 2,373,789 1,981,628 1,927,686 1,920,270
Stockholders’ equity 361,430 354,191 293,018 292,138 286,616
Stockholders’ equity / assets 12.51 % 12.09 % 11.83 % 11.92 % 11.89 %
Goodwill     98,065       90,768       61,798       61,798       61,798  
Average Balances
Total assets $ 2,908,483 $ 2,622,402 $ 2,458,952 $ 2,425,535 $ 2,391,064
Earning assets 2,591,397 2,355,544 2,226,868 2,194,170 2,162,574
Loans 2,238,061 2,026,067 1,908,731 1,879,760 1,828,984
Deposits and interest-bearing liabilities 2,516,024 2,275,724 2,133,868 2,103,054 2,079,442
Deposits 2,346,336 2,109,637 1,954,631 1,929,368 1,903,139
Stockholders’ equity 357,523 314,442 292,301 288,609 282,573
Stockholders’ equity / assets     12.29 %     11.99 %     11.89 %     11.90 %     11.82 %
Per Common Share Data
Net Income:
Basic $ 0.82 $ 0.54 $ 0.82 $ 0.78 $ 0.81
Diluted 0.82 0.54 0.81 0.78 0.80
Dividends 0.25 0.25 0.22 0.22 0.22
Market Value:
High $ 56.90 $ 51.15 $ 52.31 $ 46.83 $ 41.21
Low 48.78 46.27 36.91 35.90 37.53
Close 52.68 49.51 50.74 44.64 38.85
Common Book Value 35.61 34.92 32.62 32.53 31.95
Shares outstanding, end of period (in thousands)     10,149       10,143       8,983       8,980       8,971  
Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.89 % 3.81 % 3.76 % 3.69 % 3.71 %
Return on average assets 1.15 % 0.79 % 1.19 % 1.16 % 1.22 %
Return on average equity 9.36 % 6.63 % 10.02 % 9.71 % 10.34 %
Efficiency ratio (2) 58.96 % 70.85 % 62.09 % 63.87 % 61.51 %
Effective tax rate 30.58 % 42.87 % 31.81 % 29.82 % 31.28 %
Common dividend payout ratio (basic)     30.49 %     46.30 %     26.83 %     28.21 %     27.16 %

(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)   2nd Qtr 2017   1st Qtr 2017   4th Qtr 2016   3rd Qtr 2016   2nd Qtr 2016
Loan Portfolio Composition
One to four family residential real estate $ 276,578 $ 276,931 $ 207,550 $ 209,097 $ 206,861
Construction 234,688 199,724 182,886 177,075 161,282
Commercial real estate 1,182,087 1,193,906 1,040,562 1,043,820 1,001,315
Commercial 515,004 504,366 469,055 456,099 428,599
Consumer finance 28,860 27,696 16,680 17,251 16,690
Home equity and improvement   130,429       132,965       118,429       118,165       116,685  
Total loans 2,367,646 2,335,588 2,035,162 2,021,507 1,931,432
Less:
Undisbursed loan funds 112,000 95,460 93,355 94,552 68,850
Deferred loan origination fees 1,211 1,264 1,320 1,261 1,179
Allowance for loan loss   25,915       25,749       25,884       25,923       25,948  
Net Loans $ 2,228,520     $ 2,213,115     $ 1,914,603     $ 1,899,771     $ 1,835,455  
                     
Allowance for loan loss activity
Beginning allowance $ 25,749 $ 25,884 $ 25,923 $ 25,948 $ 25,668
Provision for loan losses 2,118 55 (149 ) 15 53
Credit loss charge-offs:
One to four family residential real estate - 49 147 111 37
Commercial real estate 110 290 0 79 0
Commercial 2,027 - 234 26 18
Consumer finance 21 71 53 24 18
Home equity and improvement   100       54       98       74       66  
Total charge-offs 2,258 464 532 314 139
Total recoveries   306       274       642       274       366  
Net charge-offs (recoveries)   1,952       190       (110 )     40       (227 )
Ending allowance $

25,915

    $ 25,749     $ 25,884     $ 25,923     $ 25,948  
                     
Credit Quality
Total non-performing loans (1) $ 30,359 $ 15,057 $ 14,348 $ 18,198 $ 16,423
Real estate owned (REO)   672       705       455       704       1,079  
Total non-performing assets (2) $ 31,031     $ 15,762     $ 14,803     $ 18,902     $ 17,502  
Net charge-offs (recoveries) 1,952 190 (110 ) 40 (227 )
 
Restructured loans, accruing (3) 10,521 9,814 10,544 9,113 9,648
 
Allowance for loan losses / loans 1.15 % 1.15 % 1.33 % 1.35 % 1.39 %
Allowance for loan losses / non-performing assets 83.51 % 163.36 % 174.86 % 137.14 % 148.26 %
Allowance for loan losses / non-performing loans 85.36 % 171.01 % 180.40 % 142.45 % 158.00 %
Non-performing assets / loans plus REO 1.38 % 0.70 % 0.76 % 0.98 % 0.94 %
Non-performing assets / total assets 1.07 % 0.54 % 0.60 % 0.77 % 0.73 %
Net charge-offs / average loans (annualized) 0.35 % 0.04 % -0.02 % 0.01 % -0.05 %
                     
Deposit Balances
Non-interest-bearing demand deposits $ 520,778 $ 579,943 $ 487,663 $ 443,321 $ 442,811
Interest-bearing demand deposits and money market 967,834 973,459 816,665 810,393 805,550
Savings deposits 288,643 288,498 243,369 241,016 240,316
Retail time deposits less than $250,000 499,298 490,953 400,080 399,749 399,494
Retail time deposits greater than $250,000   50,149       40,936       33,851       33,207       32,099  
Total deposits $ 2,326,702     $ 2,373,789     $ 1,981,628     $ 1,927,686     $ 1,920,270  

(1)

 

Non-performing loans consist of non-accrual loans.

(2)

Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof.

(3)

Accruing restructured loans are loans with known credit problems that are not contractually past due and therefore are not included in non-performing loans.

 
                 
Loan Delinquency Information
First Defiance Financial Corp.
       
 
30 to 89 days Non Accrual
(dollars in thousands)   Total Balance   Current   past due   Loans
 
June 30, 2017                
One to four family residential real estate $ 276,578 $ 270,729 $ 2,710 $ 3,139
Construction 234,688 234,445 - 243
Commercial real estate 1,182,087 1,161,810 1,370 18,907
Commercial 515,004 506,996 545 7,463
Consumer finance 28,860 28,594 215 51
Home equity and improvement   130,429     128,668     1,205     556
Total loans $ 2,367,646   $ 2,331,242   $ 6,045   $ 30,359
 
December 31, 2016                
One to four family residential real estate $ 207,550 $ 203,624 $ 998 $ 2,928
Construction 182,886 182,886 - -
Commercial real estate 1,040,562 1,030,833 137 9,592
Commercial 469,055 468,038 10 1,007
Consumer finance 16,680 16,438 151 91
Home equity and improvement   118,429     116,439     1,260     730
Total loans $ 2,035,162   $ 2,018,258   $ 2,556   $ 14,348
 
June 30, 2016                
One to four family residential real estate $ 206,861 $ 203,534 $ 619 $ 2,708
Construction 161,282 161,282 - -
Commercial real estate 1,001,315 988,342 2,174 10,799
Commercial 428,599 424,107 2,269 2,223
Consumer finance 16,690 16,629 45 16
Home equity and improvement   116,685     115,376     632     677
Total loans $ 1,931,432   $ 1,909,270   $ 5,739   $ 16,423

More news and information about First Defiance Financial Corp.

Published By:

Business Wire: 22:30 GMT Monday 17th July 2017

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