First Defiance Financial Corp. Announces 2018 Third Quarter Earnings

First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the third quarter ended September 30, 2018, totaled $11.3 million, or $0.55 per diluted common share compared to $9.4 million or $0.46 per diluted common share for the quarter ended September 30, 2017.

Our third quarter results reflect the continued high financial performance of our company, said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. Our ability to grow our balance sheet and maintain strong profitability delivered excellent results for our shareholders, with earnings per share up 19.6% from the third quarter last year.

Net Interest Income up Compared to Third Quarter 2017

Net interest income of $27.5 million in the third quarter of 2018 was up from $25.0 million in the third quarter of 2017. The increase was primarily due to the growth in earning assets supplemented by expansion in the net interest margin versus the third quarter last year. The net interest margin was 4.00% for the third quarter of 2018, up from 3.95% in the second quarter of 2018, and up from 3.91% in the third quarter of 2017. Yield on interest earning assets increased by 25 basis points, to 4.63% in the third quarter of 2018 from 4.38% in the third quarter of 2017. The cost of interest-bearing liabilities increased by 24 basis points in the third quarter of 2018 to 0.85% from 0.61% in the third quarter of 2017.

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Our solid growth in loans and core deposits continued to fuel our net interest margin and generate strong growth in net interest income, said Hileman. Commercial loan demand was particularly robust and led to total loan growth of $71.0 million, or 11.9% annualized, while deposits grew $35.3 million, or 5.7% annualized. This growth combined with a healthy net interest margin for the quarter produced a strong increase in our net interest income, which is up 10.1% over the third quarter last year.

Non-Interest Income up from Third Quarter 2017

First Defiances non-interest income for the third quarter of 2018 was $9.9 million compared with $9.5 million in the third quarter of 2017. The third quarter of 2018 included gains of $76,000 from the sale of securities compared to gains of $158,000 in the third quarter of 2017.

Mortgage banking income was $1.9 million in the third quarter of 2018, up from $1.7 million in the third quarter of 2017. Mortgage originations totaled $74.0 million in the third quarter of 2018 compared to $71.8 million in the same quarter last year. As a result of the higher volumes, gains from the sale of mortgage loans increased in the third quarter of 2018 to $1.3 million from $1.2 million in the third quarter of 2017. Mortgage loan servicing revenue was $929,000 in the third quarter of 2018, up from $911,000 in the third quarter of 2017 and amortization of mortgage servicing rights declined to $340,000 from $386,000 in the third quarter last year.

For the third quarter of 2018, commissions from the sale of insurance products were $3.3 million, up from $3.1 million in the third quarter of 2017. Service fees and other charges were $3.3 million in the third quarter of 2018, up from $3.2 million in the third quarter of 2017. Trust income was $514,000 in the third quarter of 2018, up from $486,000 in the third quarter of 2017.

Our key business lines drove our 5.5% growth in non-interest income, excluding securities gains, over the third quarter last year, said Hileman. When compared to the same period last year, mortgage banking revenues grew 10.5%, insurance commissions were up 5.6% and trust revenues rose 5.8%.

Non-Interest Expenses up from Third Quarter 2017

Total non-interest expense was $22.3 million in the third quarter of 2018, an increase from $20.4 million in the third quarter of 2017. Compensation and benefits increased to $12.9 million in the third quarter of 2018, compared to $11.8 million in the third quarter of 2017. Occupancy expense and data processing expense were both $2.2 million in the third quarter of 2018, up from $2.0 million and $1.9 million, respectively, in the third quarter of 2017. Other non-interest expense of $4.0 million in the third quarter of 2018 was up from $3.7 million in the third quarter of 2017.

Credit Quality

Non-performing loans totaled $20.9 million at September 30, 2018, a decrease from $29.2 million at September 30, 2017. In addition, First Defiance had $1.7 million of real estate owned at September 30, 2018, compared to $532,000 at September 30, 2017. Accruing troubled debt restructured loans were $12.6 million at September 30, 2018, compared with $13.0 million at September 30, 2017.

The third quarter 2018 results include net charge-offs of $1.1 million and a provision for loan losses of $1.4 million compared with net charge-offs of $36,000 and a provision of $462,000 for the same period in 2017.

The allowance for loan loss as a percentage of total loans was 1.13% at September 30, 2018, compared with 1.15% at June 30, 2018, and 1.16% at September 30, 2017.

Our credit quality metrics remained strong and steady in the third quarter and showed improvement from a year ago, said Hileman. Total non-performing assets including troubled debt restructurings declined 17.6% from last year. Our allowance for loan losses coverage of nonaccrual loans was 132% at the end of the third quarter.

Year-To-Date Results

For the nine-month period ended September 30, 2018, net income totaled $34.2 million, or $1.67 per diluted common share, compared to $22.9 million, or $1.15 per diluted common share for the nine months ended September 30, 2017. The first nine months of 2017 included approximately seven months of operations of the Commercial Savings Bank (CSB) acquisition completed on February 24, 2017, and six months of operations from Corporate One acquired on April 1, 2017. In comparison, the first nine months of 2018 results fully include the operations from both CSB and Corporate One. In addition, the first nine 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 $79.8 million for the first nine months of 2018 compared with $71.3 million in the first nine months of 2017. Average interest-earning assets increased to $2.71 billion in the first nine months of 2018 compared to $2.51 billion in the first nine months of 2017. Net interest margin for the first nine months of 2018 was 3.97%, up 9 basis points from the 3.88% margin reported in the nine month period ended September 30, 2017.

The provision for loan losses in the first nine months of 2018 was $704,000 compared to $2.6 million recorded during the first nine months of 2017.

Non-interest income for the first nine months of 2018 was $30.8 million compared to $30.2 million during the same period of 2017. The first nine months of 2017 included 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 $9.8 million for the first nine months of 2018, up from $9.1 million during the same period of 2017. Mortgage banking income was $5.6 million for the first nine months of 2018 compared with $5.3 million during the same period of 2017. Insurance commissions rose to $11.0 million for the first nine months of 2018 compared with $9.8 million for the same period of 2017. Non-interest income for the first nine months of 2018 included $76,000 of gains from the sale of securities compared with securities gains of $425,000 during the same period of 2017.

Non-interest expense was $68.2 million for the first nine months of 2018, up from $64.2 million for the same period of 2017. Compensation and benefits expense was $39.0 million for the first nine months of 2018 compared with $37.6 million during the same period of 2017. Expenses also included increases in occupancy of $500,000, data processing of $517,000 and other expenses of $1.5 million.

Total Assets at $3.10 Billion

Total assets at September 30, 2018, were $3.10 billion compared to $2.99 billion at December 31, 2017, and $2.93 billion at September 30, 2017.

Net loans receivable (excluding loans held for sale) were $2.43 billion at September 30, 2018, compared to $2.32 billion at December 31, 2017, and $2.25 billion at September 30, 2017. Also, at September 30, 2018, goodwill and other intangible assets totaled $103.3 million compared to $104.3 million at December 31, 2017, and $104.4 million at September 30, 2017. Total deposits at September 30, 2018, were $2.52 billion compared with $2.44 billion at December 31, 2017, and $2.36 billion at September 30, 2017.

Total stockholders equity was $393.5 million at September 30, 2018, compared to $373.3 million at December 31, 2017, and $367.9 million at September 30, 2017.

Dividend to be Paid November 16

The Board of Directors declared a quarterly cash dividend of $0.17 per common share payable November 16, 2018, to shareholders of record at the close of business on November 9, 2018. The dividend represents an annual dividend of 2.52 percent based on the First Defiance common stock closing price on October 12, 2018. First Defiance has approximately 20,401,460 common shares outstanding.

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, October 16, 2018, 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 https://services.choruscall.com/links/fdef181016.html.

The replay of the conference call webcast will be available at www.fdef.com until October 16, 2019, 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 and First Insurance Group. First Federal Bank operates 44 full-service branches and numerous ATM locations in northwest and central Ohio, southeast Michigan and northeast Indiana and a loan production office in Ann Arbor, Michigan. First Insurance Group is a full-service insurance agency with nine offices throughout northwest Ohio.

For more information, visit the companys website 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, 2017. 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 September 30, 2018 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.
   
September 30, December 31,
(in thousands)   2018   2017
 
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions $ 55,526 $ 58,693
Interest-bearing deposits   44,000     55,000  
99,526 113,693
Securities
Available-for sale, carried at fair value 282,962 260,650
Held-to-maturity, carried at amortized cost   603     648  
283,565 261,298
 
Loans 2,456,357 2,348,713
Allowance for loan losses   (27,639 )   (26,683 )
Loans, net 2,428,718 2,322,030
Loans held for sale 12,485 10,435
Mortgage servicing rights 10,054 9,808
Accrued interest receivable 11,258 8,706
Federal Home Loan Bank stock 14,217 15,992
Bank Owned Life Insurance 67,259 66,230
Office properties and equipment 40,413 40,217
Real estate and other assets held for sale 1,676 1,532
Goodwill 98,569 98,569
Core deposit and other intangibles 4,705 5,703
Deferred taxes 1,353 231
Other assets   24,295     38,959  
Total Assets $ 3,098,093   $ 2,993,403  
 
Liabilities and Stockholders Equity
Non-interest-bearing deposits $ 556,316 $ 571,360
Interest-bearing deposits   1,968,115     1,866,296  
Total deposits 2,524,431 2,437,656
Advances from Federal Home Loan Bank 100,222 84,279
Notes payable and other interest-bearing liabilities 4,162 26,019
Subordinated debentures 36,083 36,083
Advance payments by borrowers for tax and insurance 4,561 2,925
Other liabilities   35,177     33,155  
Total Liabilities 2,704,636 2,620,117
Stockholders Equity
Preferred stock
Common stock, net 127 127
Additional paid-in-capital 161,179 160,940
Accumulated other comprehensive income (loss) (4,921 ) 217
Retained earnings 286,960 262,900
Treasury stock, at cost   (49,888 )   (50,898 )
Total stockholders equity   393,457     373,286  
Total Liabilities and Stockholders Equity $ 3,098,093   $ 2,993,403  
 
                 
Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
  Three Months Ended   Nine Months Ended
September 30, September 30,
(in thousands, except per share amounts)   2018   2017 2018   2017
Interest Income:    
Loans $ 29,371 $ 25,975 $ 83,557 $ 73,263
Investment securities 2,077 1,688 5,967 5,195
Interest-bearing deposits 275 209 945 555
FHLB stock dividends   240   209   698   562
Total interest income 31,963 28,081 91,167 79,575
Interest Expense:
Deposits 3,753 2,391 9,508 6,357
FHLB advances and other 342 431 943 1,211
Subordinated debentures 334 239 934 682
Notes Payable   5   13   19   41
Total interest expense   4,434   3,074   11,404   8,291
Net interest income 27,529 25,007 79,763 71,284
Provision for loan losses   1,376   462   704   2,635
Net interest income after provision for loan losses 26,153 24,545 79,059 68,649
Non-interest Income:
Service fees and other charges 3,335 3,153 9,762 9,073
Mortgage banking income 1,877 1,698 5,632 5,266
Gain on sale of non-mortgage loans 33 82 300 172
Gain on sale of securities 76 158 76 425
Insurance commissions 3,254 3,082 11,024 9,834
Trust income 514 486 1,588 1,400
Income from Bank Owned Life Insurance 399 421 1,365 2,666
Other non-interest income   434   415   1,092   1,348
Total Non-interest Income 9,922 9,495 30,839 30,184
Non-interest Expense:
Compensation and benefits 12,882 11,780 39,016 37,588
Occupancy 2,154 1,960 6,251 5,751
FDIC insurance premium 255 330 817 973
Financial institutions tax 531 404 1,593 1,418
Data processing 2,161 1,874 6,349 5,832
Amortization of intangibles 319 364 998 931
Other non-interest expense   3,984   3,728   13,178   11,718
Total Non-interest Expense   22,286   20,440   68,202   64,211
Income before income taxes 13,789 13,600 41,696 34,622
Income taxes   2,483   4,219   7,544   11,753
Net Income $ 11,306 $ 9,381 $ 34,152 $ 22,869
 
 
Earnings per common share:
Basic $ 0.55 $ 0.46 $ 1.68 $ 1.15
Diluted $ 0.55 $ 0.46 $ 1.67 $ 1.15
 
Average Shares Outstanding:
Basic 20,400 20,298 20,373 19,826
Diluted 20,467 20,418 20,465 19,940
 
                         
Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.
  Three Months Ended       Nine Months Ended
September 30, September 30,
(dollars in thousands, except per share data)   2018   2017   % change       2018   2017   % change
Summary of Operations        
 
Tax-equivalent interest income (2) $ 32,220 $ 28,557 12.8 % $ 91,913 $ 81,007 13.5 %
Interest expense 4,434 3,074 44.2 11,404 8,291 37.5
Tax-equivalent net interest income (2) 27,786 25,483 9.0 80,509 72,716 10.7
Provision for loan losses 1,376 462 197.8 704 2,635 (73.3 )
Tax-equivalent NII after provision for loan loss (2) 26,410 25,021 5.6 79,805 70,081 13.9
Investment securities gains 76 158 (51.9 ) 76 425 (82.1 )
Non-interest income (excluding securities gains/losses) 9,846 9,337 5.5 30,763 29,759 3.4
Non-interest expense 22,286 20,440 9.0 68,202 64,211 6.2
Income taxes 2,483 4,219 (41.1 ) 7,544 11,753 (35.8 )
Net Income 11,306 9,381 20.5 34,152 22,869 49.3
Tax equivalent adjustment (2)     257       476     (46.0 )         746       1,432     (47.9 )
At Period End
Assets 3,098,093 2,935,030 5.6
Earning assets 2,810,624 2,633,996 6.7
Loans 2,456,357 2,276,042 7.9
Allowance for loan losses 27,639 26,341 4.9
Deposits 2,524,431 2,360,675 6.9
Stockholders equity     393,457       367,924     6.9                  
Average Balances
Assets 3,059,225 2,906,795 5.2 3,018,632 2,812,560 7.3
Earning assets 2,754,561 2,590,463 6.3 2,710,998 2,511,469 7.9
Loans 2,403,932 2,251,071 6.8 2,352,514 2,171,733 8.3
Deposits and interest-bearing liabilities 2,633,054 2,507,805 5.0 2,599,540 2,433,185 6.8
Deposits 2,513,708 2,338,817 7.5 2,478,526 2,264,930 9.4
Stockholders equity 389,361 363,612 7.1 381,506 345,192 10.5
Stockholders equity / assets     12.73 %     12.51 %   1.7           12.64 %     12.27 %   3.0  
Per Common Share Data
Net Income
Basic $ 0.55 $ 0.46 19.6 $ 1.68 $ 1.15 46.1
Diluted 0.55 0.46 19.6 1.67 1.15 45.9
Dividends 0.17 0.125 36.0 0.47 0.375 25.3
Market Value:
High $ 35.00 $ 27.00 29.7 $ 35.00 $ 28.45 23.0
Low 29.61 23.51 26.0 25.51 23.14 10.3
Close 30.11 26.25 14.7 30.11 26.25 14.7
Common Book Value 19.29 18.13 6.4 19.29 18.13 6.4
Tangible Common Book Value (1) 14.23 12.98 9.6 14.23 12.98 9.6
Shares outstanding, end of period (000)     20,396       20,298     0.5           20,396       20,298     0.5  
Performance Ratios (annualized)
Tax-equivalent net interest margin (2) 4.00 % 3.91 % 2.2 3.97 % 3.88 % 2.3
Return on average assets 1.47 % 1.28 % 14.5 1.51 % 1.09 % 39.1
Return on average equity 11.52 % 10.24 % 12.6 11.97 % 8.86 % 35.1
Efficiency ratio (3) 59.22 % 58.70 % 0.9 61.29 % 62.66 % (2.2 )
Effective tax rate 18.01 % 31.02 % (42.0 ) 18.09 % 33.95 % (46.7 )
Dividend payout ratio (basic)     30.91 %     27.17 %   13.7           27.98 %     32.47 %   (13.8 )
 

(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 21% in 2018 and 35% in 2017.

(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 Nine Months Ended
September 30, September 30,
(dollars in thousands)   2018   2017   2018   2017
 
Gain from sale of mortgage loans $ 1,280 $ 1,200 $ 3,744 $ 3,577
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue 929 911 2,806 2,769
Amortization of mortgage servicing rights (340 ) (386 ) (1,009 ) (1,101 )
Mortgage servicing rights valuation adjustments   8       (27 )   91       21  
  597       498     1,888       1,689  
Total revenue from sale and servicing of mortgage loans $ 1,877     $ 1,698   $ 5,632     $ 5,266  
 
                                 
Yield Analysis
First Defiance Financial Corp.
  Three Months Ended September 30,
(dollars in thousands)
2018     2017  
Average     Yield Average     Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 2,403,932 $ 29,397 4.85% $ 2,251,071 $ 26,025 4.59%
Securities 286,507 2,308 3.16% (3) 259,310 2,114 3.29% (3)
Interest Bearing Deposits 49,734 275 2.19% 64,090 209 1.29%
FHLB stock 14,388 240 6.62% 15,992 209 5.18%
Total interest-earning assets 2,754,561 32,220 4.63% 2,590,463 28,557 4.38%
Non-interest-earning assets 304,664 316,332
Total assets $ 3,059,225 $ 2,906,795
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 1,955,518 $ 3,753 0.76% $ 1,818,670 $ 2,391 0.52%
FHLB advances and other 77,719 342 1.75% 104,648 431 1.63%
Subordinated debentures 36,196 334 3.66% 36,158 239 2.62%
Notes payable 5,431 5 0.37% 28,182 13 0.18%
Total interest-bearing liabilities 2,074,864 4,434 0.85% 1,987,658 3,074 0.61%
Non-interest bearing deposits 558,190 520,147
Total including non-interest-bearing demand deposits 2,633,054 4,434 0.67% 2,507,805 3,074 0.49%
Other non-interest-bearing liabilities 36,810 35,378
Total liabilities 2,669,864 2,543,183
Stockholders’ equity 389,361 363,612
Total liabilities and stockholders’ equity $ 3,059,225   $ 2,906,795  
Net interest income; interest rate spread $ 27,786 3.78% $ 25,483 3.77%
Net interest margin (4) 4.00% 3.91%
Average interest-earning assets to average interest bearing liabilities 133% 130%
 
Nine Months Ended September 30,
2018 2017
Average Yield Average Yield
Balance Interest(1) Rate Balance Interest(1) Rate
Interest-earning assets:
Loans receivable $ 2,352,514 $ 83,633 4.75% $ 2,171,733 $ 73,415 4.52%
Securities 276,745 6,637 3.21% (3) 257,924 6,475 3.40% (3)
Interest Bearing Deposits 66,283 945 1.91% 66,299 555 1.12%
FHLB stock 15,456 698 6.04% 15,513 562 4.84%
Total interest-earning assets 2,710,998 91,913 4.53% 2,511,469 81,007 4.32%
Non-interest-earning assets 307,634 301,091
Total assets $ 3,018,632 $ 2,812,560
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 1,925,972 $ 9,508 0.66% $ 1,743,769 $ 6,357 0.49%
FHLB advances and other 74,634 943 1.69% 104,616 1,211 1.55%
Subordinated debentures 36,195 934 3.45% 36,155 682 2.51%
Notes payable 10,185 19 0.25% 27,484 41 0.20%
Total interest-bearing liabilities 2,046,986 11,404 0.74% 1,912,024 8,291 0.58%
Non-interest bearing deposits 552,554 521,161
Total including non-interest-bearing demand deposits 2,599,540 11,404 0.59% 2,433,185 8,291 0.46%
Other non-interest-bearing liabilities 37,586 34,183
Total liabilities 2,637,126 2,467,368
Stockholders’ equity 381,506 345,192
Total liabilities and stockholders’ equity $ 3,018,632   $ 2,812,560  
Net interest income; interest rate spread $ 80,509 3.79% $ 72,716 3.74%
Net interest margin (4) 3.97% 3.88%
Average interest-earning assets to average interest bearing liabilities 132% 131%
 

(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 21% in 2018 and 35% in 2017.

(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 tax equivalent net interest income divided by average interest-earning assets.

 
                     
Selected Quarterly Information
First Defiance Financial Corp.
         
(dollars in thousands, except per share data)   3rd Qtr 2018   2nd Qtr 2018   1st Qtr 2018   4th Qtr 2017   3rd Qtr 2017
Summary of Operations
Tax-equivalent interest income (1) $ 32,220 $ 30,550 $ 29,142 $ 29,009 $ 28,557
Interest expense 4,434 3,752 3,218 3,140 3,074
Tax-equivalent net interest income (1) 27,786 26,798 25,924 25,869 25,483
Provision for loan losses 1,376 423 (1,095 ) 314 462
Tax-equivalent NII after provision for loan losses (1) 26,410 26,375 27,019 25,555 25,021
Investment securities gains, net of impairment 76 160 158
Non-interest income (excluding securities gains/losses) 9,846 10,214 10,703 9,737 9,337
Non-interest expense 22,286 22,665 23,251 21,141 20,440
Income taxes 2,483 2,564 2,497 4,430 4,219
Net income 11,306 11,109 11,737 9,399 9,381
Tax equivalent adjustment (1)     257       251       237       482       476  
At Period End
Total assets $ 3,098,093 $ 3,039,589 $ 3,023,004 $ 2,993,403 $ 2,935,030
Earning assets 2,810,624 2,756,712 2,748,338 2,691,438 2,633,996
Loans 2,456,357 2,385,344 2,358,330 2,348,713 2,276,042
Allowance for loan losses 27,639 27,321 27,267 26,683 26,341
Deposits 2,524,431 2,489,128 2,491,801 2,437,656 2,360,675
Stockholders equity 393,457 386,920 379,214 373,286 367,924
Stockholders equity / assets 12.70 % 12.73 % 12.54 % 12.47 % 12.54 %
Goodwill     98,569       98,569       98,569       98,569       98,370  
Average Balances
Total assets $ 3,059,225 $ 3,018,808 $ 2,977,864 $ 2,968,445 $ 2,906,795
Earning assets 2,754,561 2,714,328 2,664,114 2,646,643 2,590,463
Loans 2,403,932 2,337,294 2,316,316 2,279,358 2,251,071
Deposits and interest-bearing liabilities 2,633,054 2,600,029 2,565,537 2,560,258 2,507,805
Deposits 2,513,708 2,487,430 2,434,440 2,400,061 2,338,817
Stockholders equity 389,361 381,165 373,993 369,366 363,612
Stockholders equity / assets     12.73 %     12.63 %     12.56 %     12.44 %     12.51 %
Per Common Share Data
Net Income:
Basic $ 0.55 $ 0.54 $ 0.58 $ 0.47 $ 0.46
Diluted 0.55 0.54 0.58 0.46 0.46
Dividends 0.17 0.15 0.150 0.125 0.125
Market Value:
High $ 35.00 $ 33.72 $ 29.93 $ 28.46 $ 27.00
Low 29.61 27.63 25.51 25.14 23.51
Close 30.11 33.53 28.66 25.99 26.25
Common Book Value 19.29 18.97 18.62 18.38 18.13
Shares outstanding, end of period (in thousands)     20,396       20,396       20,364       20,312       20,298  
Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 4.00 % 3.95 % 3.95 % 3.88 % 3.91 %
Return on average assets 1.47 % 1.48 % 1.60 % 1.26 % 1.28 %
Return on average equity 11.52 % 11.69 % 12.73 % 10.10 % 10.24 %
Efficiency ratio (2) 59.22 % 61.24 % 63.48 % 59.37 % 58.70 %
Effective tax rate 18.01 % 18.75 % 17.54 % 32.03 % 31.02 %
Common dividend payout ratio (basic)     30.91 %     27.78 %     26.09 %     26.88 %     27.17 %

(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 21% in 2018 and 35% in 2017.

(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)   3rd Qtr 2018   2nd Qtr 2018   1st Qtr 2018   4th Qtr 2017   3rd Qtr 2017
Loan Portfolio Composition
One to four family residential real estate $ 313,300 $ 307,480 $ 275,547 $ 274,862 $ 271,048
Construction 274,344 283,911 251,944 265,476 244,920
Commercial real estate 1,363,087 1,283,698 1,282,027 1,235,221 1,205,695
Commercial 489,393 489,296 500,496 526,142 510,240
Consumer finance 32,379 29,724 28,035 29,109 29,009
Home equity and improvement   129,295       129,868       133,407       135,457       132,220  
Total loans 2,601,798 2,523,977 2,471,456 2,466,267 2,393,132
Less:
Undisbursed loan funds 143,286 136,563 111,450 115,972 115,714
Deferred loan origination fees 2,155 2,070 1,676 1,582 1,379
Allowance for loan loss   27,639       27,321       27,267       26,683       26,341  
Net Loans $ 2,428,718     $ 2,358,023     $ 2,331,063     $ 2,322,030     $ 2,249,698  
                     
Allowance for loan loss activity
Beginning allowance $ 27,321 $ 27,267 $ 26,683 $ 26,341 $ 25,915
Provision for loan losses 1,376 423 (1,095 ) 314 462
Credit loss charge-offs:
One to four family residential real estate 136 78 16 170 60
Commercial real estate 1,048 254 55 29 0
Commercial 528 84 97 210 64
Consumer finance 25 72 31 27 20
Home equity and improvement   36       41       117       55       92  
Total charge-offs 1,773 529 316 491 236
Total recoveries   715       160       1,995       519       200  
Net charge-offs (recoveries)   1,058       369       (1,679 )     (28 )     36  
Ending allowance $ 27,639     $ 27,321     $ 27,267     $ 26,683     $ 26,341  
                     
Credit Quality
Total non-performing loans (1) $ 20,929 $ 18,340 $ 27,925 $ 30,715 $ 29,152
Real estate owned (REO)   1,676       1,795       1,440       1,532       532  
Total non-performing assets (2) $ 22,605     $ 20,135     $ 29,365     $ 32,247     $ 29,684  
Net charge-offs (recoveries) 1,058 369 (1,679 ) (28 ) 36
 
Restructured loans, accruing (3) 12,611 15,834 13,722 13,770 13,044
 
Allowance for loan losses / loans 1.13 % 1.15 % 1.16 % 1.14 % 1.16 %
Allowance for loan losses / non-performing assets 122.27 % 135.69 % 92.86 % 82.75 % 88.74 %
Allowance for loan losses / non-performing loans 132.06 % 148.97 % 97.64 % 86.87 % 90.36 %
Non-performing assets / loans plus REO 0.92 % 0.84 % 1.24 % 1.37 % 1.30 %
Non-performing assets / total assets 0.73 % 0.66 % 0.97 % 1.08 % 1.01 %
Net charge-offs / average loans (annualized) 0.18 % 0.06 % -0.29 % 0.00 % 0.01 %
                     
Deposit Balances
Non-interest-bearing demand deposits $ 556,316 $ 548,147 $ 550,742 $ 571,360 $ 519,911
Interest-bearing demand deposits and money market 1,016,294 1,021,445 1,055,416 1,005,519 989,514
Savings deposits 293,359 297,870 306,510 302,022 296,230
Retail time deposits less than $250,000 564,379 547,871 512,746 504,912 504,277
Retail time deposits greater than $250,000   94,083       73,795       66,387       53,843       50,743  
Total deposits $ 2,524,431     $ 2,489,128     $ 2,491,801     $ 2,437,656     $ 2,360,675  

(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

 

September 30, 2018                
One to four family residential real estate $ 313,300 $ 308,108 $ 1,680 $ 3,512
Construction 274,344 274,344
Commercial real estate 1,363,087 1,351,257 138 11,692
Commercial 489,393 484,216 48 5,129
Consumer finance 32,379 32,124 221 34
Home equity and improvement   129,295     127,291     1,442     562
Total loans $ 2,601,798   $ 2,577,340   $ 3,529   $ 20,929
 
December 31, 2017                
One to four family residential real estate $ 274,862 $ 269,624 $ 2,201 $ 3,037
Construction 265,476 265,476
Commercial real estate 1,235,221 1,215,980 1,022 18,219
Commercial 526,142 515,874 1,427 8,841
Consumer finance 29,109 28,728 353 28
Home equity and improvement   135,457     131,986     2,881     590
Total loans $ 2,466,267   $ 2,427,668   $ 7,884   $ 30,715
 
September 30, 2017                
One to four family residential real estate $ 271,048 $ 265,873 $ 1,807 $ 3,368
Construction 244,920 244,920
Commercial real estate 1,205,695 1,187,826 759 17,110
Commercial 510,240 500,755 1,415 8,070
Consumer finance 29,009 28,741 209 59
Home equity and improvement   132,220     130,199     1,476     545
Total loans $ 2,393,132   $ 2,358,314   $ 5,666   $ 29,152

First Defiance Financial Corp.
Donald P. Hileman, 419-782-5104
President
and CEO
[email protected]

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