First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the fiscal year ended December 31, 2015 totaled $26.4 million, or $2.82 per diluted common share, compared to $24.3 million or $2.44 per diluted common share for the year ended December 31, 2014.

For the fourth quarter 2015, First Defiance earned $6.6 million, or $0.71 per diluted common share compared to $6.4 million; or $0.65 per diluted common share for the fourth quarter of 2014. Last year’s fourth quarter results were positively impacted by a $551,000 adjustment to the provision for income taxes to reflect the utilization of capital loss carryforwards.

“We are extremely pleased with our achievement of record earnings results for 2015 with earnings per diluted share up 15.6 percent over last year,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “We are particularly encouraged by our fourth quarter performance. Our profitability remained very strong, credit quality improved, and loan and deposit growth were both exceptional, which gives us good momentum and confidence for continued success in 2016.”

Net interest income up compared to fourth quarter 2014

Net interest income of $19.0 million in the fourth quarter of 2015 was up from $18.1 million in the fourth quarter of 2014. Net interest margin was 3.77% for the fourth quarter of 2015, down from 3.78% in the third quarter 2015, but up from 3.76% in the fourth quarter of 2014. Yield on interest earning assets increased by 3 basis points, to 4.12% in the fourth quarter of 2015 from 4.09% in the fourth quarter of 2014. The cost of interest-bearing liabilities increased by 4 basis points in the fourth quarter of 2015 to 0.46% from 0.42% in the fourth quarter of 2014.

“Our healthy loan growth in particular has enabled us to maintain a solid earning asset mix, steady net interest margin and growth in net interest income which increased $866,000, or 4.8% over the same quarter last year,” said Hileman. “We expect a challenging rate environment in 2016, but we believe we are well positioned to minimize the risks of potential rate changes ahead.”

Non-interest income up from fourth quarter 2014

First Defiance’s non-interest income for the fourth quarter of 2015 was $7.7 million compared with $7.3 million in the fourth quarter of 2014. Mortgage banking income increased to $1.5 million in the fourth quarter of 2015, up from $1.3 million in the fourth quarter of 2014 due to higher volumes of both purchase and refinance loans throughout our market area. Gains from the sale of mortgage loans increased in the fourth quarter of 2015 to $836,000 from $734,000 in the fourth quarter of 2014. Mortgage loan servicing revenue was $910,000 in the fourth quarter of 2015, up slightly from $900,000 in the fourth quarter of 2014. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $75,000 in the fourth quarter of 2015 compared with a positive adjustment of $11,000 in the fourth quarter of 2014.

For the fourth quarter 2015, service fees and other charges were $2.7 million, down slightly from $2.8 million in the fourth quarter of 2014; and commissions from the sale of insurance products were $2.3 million, up from $2.2 million in the fourth quarter 2014. Trust income was $367,000 in the fourth quarter of 2015, up from $345,000 in the fourth quarter of 2014.

“Our fourth quarter non-interest revenues grew $388,000, up 5.3% over the same period last year,” said Hileman. “Continued increases in mortgage banking origination levels, up 17% from a year ago, and growth in both insurance commissions and wealth management revenues contributed to this success.”

Non-interest expenses up from fourth quarter 2014

Total non-interest expense was $17.3 million in the fourth quarter of 2015, up from $17.0 million in the fourth quarter of 2014. Compensation and benefits increased to $9.9 million in the fourth quarter of 2015 compared to $9.1 million in the fourth quarter of 2014. The increase in compensation and benefits from a year ago is mainly related to higher incentive compensation, merit increases and staff additions for growth. Occupancy expense was $1.8 million in the fourth quarter 2015, up only $58,000 from the fourth quarter 2014. Data processing cost was $1.4 million in the fourth quarter of 2015, down $92,000 from the fourth quarter of 2014. Other non-interest expense of $3.3 million in the fourth quarter of 2015, decreased from $3.8 million in the fourth quarter of 2014 primarily due to reductions in OREO costs and management consulting.

Credit quality

Non-performing loans totaled $16.3 million at December 31, 2015, a decrease from $24.1 million at December 31, 2014. In addition, First Defiance had $1.3 million of real estate owned at December 31, 2015 compared to $6.2 million at December 31, 2014. Accruing troubled debt restructured loans were $11.2 million at December 31, 2015 compared with $24.7 million at December 31, 2014. For the fourth quarter of 2015, First Defiance recorded net recoveries of $129,000, compared to net recoveries of $37,000 in the fourth quarter of 2014. The allowance for loan loss as a percentage of total loans was 1.41% at December 31, 2015 compared with 1.50% at December 31, 2014.

The fourth quarter results include a provision for loan losses of $43,000 compared with an expense of $162,000 for the same period in 2014.

“Our progress on improving asset quality continued in the fourth quarter, as non-performing assets, including troubled debt restructurings, were reduced $6.6 million during the quarter, a 48% decrease from the prior year,” said Hileman. “This improvement, along with net recoveries on loans in the quarter, has enabled us to strengthen our allowance for loan losses coverage of non-performing loans to 156% and significantly contain our provision expense.”

Annual results

For the full year ended on December 31, 2015, net income totaled $26.4 million, or $2.82 per diluted common share, compared to $24.3 million or $2.44 per diluted common share for 2014.

Net interest income for 2015 totaled $74.1 million, compared with $69.7 million for 2014. Average interest-earning assets increased to $2.00 billion for 2015, compared to $1.95 billion in 2014. Net interest margin for 2015 was 3.81%, up 13 basis points from the 3.68% margin for 2014.

The provision for loan losses for 2015 was $136,000 compared to $1.1 million in 2014 as a result of the improved credit quality previously mentioned.

Non-interest income for the year 2015 was $31.8 million, compared to $31.6 million in 2014. Service fees and other charges were $10.8 million for 2015, up from $10.3 million in 2014. Mortgage banking income increased to $6.7 million for 2015, compared with $5.6 million in 2014. Gains on the sale of non-mortgage loans were $824,000 for 2015, compared with $181,000 during 2014. Insurance and investment sales revenues increased to $10.1 million for 2015, compared with $9.9 million for 2014. Non-interest income for 2015 included only $22,000 of net securities gains compared to $932,000 of net securities gains for 2014. In addition, 2014 included a $903,000 tax-free benefit from a bank-owned life insurance policy and a $498,000 tax-free gain recognized through the company’s deferred compensation plan trust.

Non-interest expense increased to $67.9 million for 2015 from $66.8 million in 2014. Compensation and benefits expense was $37.8 million for 2015 compared with $35.5 million for 2014. The increase in compensation and benefits over the prior year is mainly related to higher incentive compensation accruals, merit increases and new staff for growth strategies, partially offset by lower medical insurance costs. Increases in occupancy of $514,000, data processing of $227,000 and financial institutions taxes of $21,000 were offset by decreases in FDIC insurance premiums of $95,000, amortization of intangibles of $403,000 and other expenses of $1.4 million, which included a $786,000 cost recorded in the first quarter 2014 for terminating a merger agreement.

Total assets at $2.3 billion

Total assets at December 31, 2015 were $2.30 billion compared to $2.18 billion at December 31, 2014. Net loans receivable (excluding loans held for sale) were $1.78 billion at December 31, 2015 compared to $1.62 billion at December 31, 2014. Total cash and cash equivalents were $79.8 million at December 31, 2015 compared with $112.9 million at December 31, 2014. Also, at December 31, 2015, goodwill and other intangible assets totaled $63.7 million compared to $63.9 million at December 31, 2014.

Total deposits at December 31, 2015 were $1.84 billion compared with $1.76 billion at December 31, 2014. Non-interest bearing deposits at December 31, 2015 were $420.7 million compared to $379.6 million at December 31, 2014. Total stockholders’ equity was $280.2 million at December 31, 2015 compared to $279.5 million at December 31, 2014.

Dividend to be paid February 26

The Board of Directors declared a quarterly cash dividend of $0.22 per common share payable February 26, 2016 to shareholders of record at the close of business on February 19, 2016. The dividend represents an annual dividend of 2.39 percent based on the First Defiance common stock closing price on January 15, 2016. First Defiance has approximately 9,054,000 common shares outstanding.

Conference call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, January 19, 2016 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/fdef160119.

Audio replay of the Internet Webcast will be available at www.fdef.com until February 19, 2016 at 9:00 a.m. ET.

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 Group. First Federal operates 34 full-service branches and 41 ATM locations in northwest Ohio, southeast Michigan and northeast Indiana and a loan production office in Columbus, Ohio. First Insurance Group is a full-service insurance agency with six 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, 2014. 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 December 31, 2015 consolidated financial statements as part of its Annual Report on Form 10-K 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.
   
December 31, December 31,
(in thousands)   2015   2014
 
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions $ 38,769 $ 41,936
Interest-bearing deposits   41,000     71,000  
79,769

 

112,936
Securities

 

Available-for sale, carried at fair value 236,435 239,321
Held-to-maturity, carried at amortized cost   243     313  
236,678 239,634
 
Loans 1,802,217 1,646,786
Allowance for loan losses   (25,382 )   (24,766 )
Loans, net 1,776,835 1,622,020
Loans held for sale 5,523 4,535
Mortgage servicing rights 9,248 9,012
Accrued interest receivable 6,171 6,037
Federal Home Loan Bank stock 13,801 13,802
Bank Owned Life Insurance 51,908 47,013
Office properties and equipment 38,165 40,496
Real estate and other assets held for sale 1,321 6,181
Goodwill 61,798 61,525
Core deposit and other intangibles 1,871 2,395
Other assets   14,588     13,366  
Total Assets $ 2,297,676   $ 2,178,952  
 
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits $ 420,691 $ 379,552
Interest-bearing deposits   1,415,446     1,381,261  
Total deposits 1,836,137 1,760,813
Advances from Federal Home Loan Bank 59,902 21,544
Notes payable and other interest-bearing liabilities 57,188 54,759
Subordinated debentures 36,083 36,083
Advance payments by borrowers for tax and insurance 2,674 2,309
Deferred Taxes 823 1,176
Other liabilities   24,672     22,763  
Total Liabilities 2,017,479 1,899,447
Stockholders’ Equity
Preferred stock - -
Common stock, net 127 127
Common stock warrant - 878
Additional paid-in-capital 125,734 136,266
Accumulated other comprehensive income 3,622 4,114
Retained earnings 219,737 200,600
Treasury stock, at cost   (69,023 )   (62,480 )
Total stockholders’ equity   280,197     279,505  
Total Liabilities and Stockholders’ Equity $ 2,297,676   $ 2,178,952  
 
                 
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)   2015   2014 2015   2014
Interest Income:
Loans $ 18,901 $ 17,788 $ 73,346 $ 68,682
Investment securities

1,680

1,719 6,769 6,575
Interest-bearing deposits 56 66 169 349
FHLB stock dividends   139   140   552   642
Total interest income 20,776 19,713 80,836 76,248
Interest Expense:

 

Deposits 1,394 1,293 5,341 5,283
FHLB advances and other 214 131 675 528
Subordinated debentures 162 148 613 587
Notes Payable   39   40   152   161
Total interest expense   1,809   1,612   6,781   6,559
Net interest income 18,967 18,101 74,055 69,689
Provision for loan losses   43   162   136   1,117
Net interest income after provision for loan losses 18,924 17,939 73,919 68,572
Non-interest Income:
Service fees and other charges 2,734 2,766 10,752 10,258
Mortgage banking income 1,465 1,270 6,713 5,602
Gain on sale of non-mortgage loans 48 102 824 181
Gain on sale of securities 22 1 22 932
Insurance commissions 2,283 2,219 10,076 9,859
Trust income 367 345 1,462 1,240
Income from Bank Owned Life Insurance 237 218 895 1,802
Other non-interest income   574   421   1,059   1,767
Total Non-interest Income 7,730 7,342 31,803 31,641
Non-interest Expense:
Compensation and benefits 9,873 9,075 37,769 35,543
Occupancy 1,836 1,778 7,197 6,683
FDIC insurance premium 325 332 1,324 1,419
Financial institutions tax 443 239 1,783 1,762
Data processing 1,431 1,523 6,083 5,856
Amortization of intangibles 163 269 699 1,102
Other non-interest expense   3,276   3,753   13,034   14,393
Total Non-interest Expense   17,347   16,969   67,889   66,758
Income before income taxes 9,307 8,312 37,833 33,455
Income taxes   2,744   1,957   11,410   9,163
Net Income $ 6,563 $ 6,355 $ 26,423 $ 24,292
 
 
Earnings per common share:
Basic $ 0.72 $ 0.68 $ 2.87 $ 2.55
Diluted $ 0.71 $ 0.65 $ 2.82 $ 2.44
 
Average Shares Outstanding:
Basic 9,146 9,316 9,221 9,511
Diluted 9,235 9,801 9,383 9,975
 
 
Financial Summary and Comparison (Unaudited)
First Defiance Financial Corp.
   
Three Months Ended Twelve Months Ended

December 31,

December 31,

(dollars in thousands, except per share data)   2015   2014   % change   2015   2014   % change
Summary of Operations        
 
Tax-equivalent interest income (1) $ 21,256 $ 20,174 5.4 % $ 82,741 $ 78,046 6.0 %
Interest expense 1,809 1,612 12.2 6,781 6,559 3.4
Tax-equivalent net interest income (1) 19,447 18,562 4.8 75,960 71,487 6.3
Provision for loan losses 43 162 (73.5 ) 136 1,117 (87.8 )
Tax-equivalent NII after provision for loan loss (1) 19,404 18,400 5.5 75,824 70,370 7.8
Investment Securities gains 22 1 NM 22 932 (97.6 )
Non-interest income (excluding securities gains/losses) 7,708 7,341 5.0 31,781 30,709 3.5
Non-interest expense 17,347 16,969 2.2 67,889 66,758 1.7
Income taxes 2,744 1,957 40.2 11,410 9,163 24.5
Net Income 6,563 6,355 3.3 26,423 24,292 8.8
Tax equivalent adjustment (1)     480       461     4.1       1,905       1,798     6.0  
At Period End
Assets 2,297,676 2,178,952 5.4
Earning assets 2,099,219 1,975,757 6.2
Loans 1,802,217 1,646,786 9.4
Allowance for loan losses 25,382 24,766 2.5
Deposits 1,836,137 1,760,813 4.3
Stockholders’ equity     280,197       279,505     0.2              
Average Balances
Assets 2,276,060 2,184,792 4.2 2,222,866 2,162,468 2.8
Earning assets 2,051,331 1,964,074 4.4 2,000,477 1,947,078 2.7
Loans 1,732,472 1,615,657 7.2 1,687,413 1,574,753 7.2
Deposits and interest-bearing liabilities 1,967,199 1,879,918 4.6 1,916,758 1,862,834 2.9
Deposits 1,823,396 1,764,908 3.3 1,787,876 1,750,184 2.2
Stockholders’ equity 279,192 278,944 0.1 277,645 276,537 0.4
Stockholders’ equity / assets     12.27 %     12.77 %   (3.9 )     12.49 %     12.79 %   (2.3 )
Per Common Share Data
Net Income
Basic $ 0.72 $ 0.68 5.9 $ 2.87 $ 2.55 12.5
Diluted 0.71 0.65 9.2 2.82 2.44 15.6
Dividends 0.20 0.175 14.3 0.775 0.625 24.0
Market Value:
High $ 42.46 $ 35.70 18.9 $ 42.46 $ 35.70 18.9
Low 35.01 26.95 29.9 29.05 24.24 19.8
Close 37.78 34.06 10.9 37.78 34.06 10.9
Common Book Value 30.78 30.17 2.0 30.78 30.17 2.0
Tangible Common Book Value 23.79 23.25 2.3 23.79 23.25 2.3
Shares outstanding, end of period (000)     9,102       9,235     (1.4 )     9,102       9,235     (1.4 )
Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.77 % 3.76 % 0.3 3.81 % 3.68 % 3.5
Return on average assets 1.14 % 1.15 % (0.9 ) 1.19 % 1.12 % 5.8
Return on average equity 9.33 % 9.04 % 3.2 9.52 % 8.78 % 8.3
Efficiency ratio (2) 63.88 % 65.51 % (2.5 ) 63.01 % 65.32 % (3.5 )
Effective tax rate 29.48 % 23.54 % 25.2 30.16 % 27.39 % 10.1
Dividend payout ratio (basic)     27.78 %     25.74 %   7.9       27.00 %     24.51 %   10.2  
 

(1)

 

Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35%

(2)

Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains or losses, net.

NM

Percentage change not meaningful

 
                 
Income from Mortgage Banking        
 
Revenue from sales and servicing of mortgage loans consisted of the following:
Three Months Ended Twelve Months Ended

December 31,

December 31,

(dollars in thousands)   2015   2014   2015   2014
 
Gain from sale of mortgage loans $ 836 $ 734 $ 4,564 $ 3,335
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue 910 900 3,503 3,552
Amortization of mortgage servicing rights (356 ) (375 ) (1,620 ) (1,401 )
Mortgage servicing rights valuation adjustments   75       11     266       116  
  629       536     2,149       2,267  
Total revenue from sale and servicing of mortgage loans $ 1,465     $ 1,270   $ 6,713     $ 5,602  
 
                         
Yield Analysis            
First Defiance Financial Corp.
 
Three Months Ended December 31,
(dollars in thousands)
2015 2014
Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 1,732,472 $ 18,954 4.34 % $ 1,615,657 $ 17,833 4.38 %
Securities 236,361 2,107 3.64 % 238,553 2,135 3.65 %
Interest Bearing Deposits 68,697 56 0.32 % 96,062 66 0.27 %
FHLB stock   13,801   139 4.00 %   13,802   140 4.02 %
Total interest-earning assets 2,051,331 21,256 4.12 % 1,964,074 20,174 4.09 %
Non-interest-earning assets   224,729   220,718
Total assets $ 2,276,060 $ 2,184,792
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 1,408,283 $ 1,394 0.39 % $ 1,393,584 $ 1,293 0.37 %
FHLB advances and other 50,419 214 1.68 % 21,628 131 2.40 %
Subordinated debentures 36,128 162 1.78 % 36,128 148 1.63 %
Notes payable   57,256   39 0.27 %   57,254   40 0.28 %
Total interest-bearing liabilities 1,552,086 1,809 0.46 % 1,508,594 1,612 0.42 %
Non-interest bearing deposits   415,113   - -   371,324   - -
Total including non-interest-bearing demand deposits 1,967,199 1,809 0.36 % 1,879,918 1,612 0.34 %
Other non-interest-bearing liabilities   29,669   25,930
Total liabilities 1,996,868 1,905,848
Stockholders' equity   279,192   278,944
Total liabilities and stockholders' equity $ 2,276,060   $ 2,184,792  
Net interest income; interest rate spread $ 19,447 3.66 % $ 18,562 3.67 %
Net interest margin (3) 3.77 % 3.76 %
Average interest-earning assets to average interest bearing liabilities 132 % 130 %
 
Twelve Months Ended December 31,
2015 2014
Average Yield Average Yield
Balance Interest(1) Rate Balance Interest(1) Rate
Interest-earning assets:
Loans receivable $ 1,687,413 $ 73,544 4.36 % $ 1,574,753 $ 68,828 4.37 %
Securities 239,852 8,476 3.64 % 223,534 8,227 3.79 %
Interest Bearing Deposits 59,410 169 0.28 % 134,114 349 0.26 %
FHLB stock   13,802   552 4.00 %   14,677   642 4.37 %
Total interest-earning assets 2,000,477 82,741 4.15 % 1,947,078 78,046 4.01 %
Non-interest-earning assets   222,389   215,390
Total assets $ 2,222,866 $ 2,162,468
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 1,399,619 $ 5,341 0.38 % $ 1,399,507 $ 5,283 0.38 %
FHLB advances and other 38,134 675 1.77 % 21,995 528 2.40 %
Subordinated debentures 36,129 613 1.70 % 36,131 587 1.62 %
Notes payable   54,619   152 0.28 %   54,524   161 0.30 %
Total interest-bearing liabilities 1,528,501 6,781 0.44 % 1,512,157 6,559 0.43 %
Non-interest bearing deposits   388,257   - -   350,677   - -
Total including non-interest-bearing demand deposits 1,916,758 6,781 0.35 % 1,862,834 6,559 0.35 %
Other non-interest-bearing liabilities   28,463   23,097
Total liabilities 1,945,221 1,885,931
Stockholders' equity   277,645   276,537
Total liabilities and stockholders' equity $ 2,222,866   $ 2,162,468  
Net interest income; interest rate spread $ 75,960 3.71 % $ 71,487 3.57 %
Net interest margin (3) 3.81 % 3.68 %
Average interest-earning assets to average interest bearing liabilities 131 % 129 %
 

(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 2015   3rd Qtr 2015   2nd Qtr 2015   1st Qtr 2015   4th Qtr 2014
Summary of Operations
Tax-equivalent interest income (1) $ 21,256 $ 20,748 $ 20,516 $ 20,221 $ 20,174
Interest expense 1,809 1,733 1,672 1,567 1,612
Tax-equivalent net interest income (1) 19,447 19,015 18,844 18,654 18,562
Provision for loan losses 43 (27 ) - 120 162
Tax-equivalent NII after provision for loan losses (1) 19,404 19,042 18,844 18,534 18,400
Investment securities gains, net of impairment 22 - - - 1
Non-interest income (excluding securities gains/losses) 7,708 7,982 7,809 8,281 7,341
Non-interest expense 17,347 16,848 16,796 16,897 16,969
Income taxes 2,744 2,998 2,815 2,853 1,957
Net income 6,563 6,696 6,563 6,601 6,355
Tax equivalent adjustment (1)     480       482       479       464       461  
At Period End
Total assets $ 2,297,676 $ 2,228,281 $ 2,196,510 $ 2,201,321 $ 2,178,952
Earning assets 2,099,219 2,030,218 1,998,580 1,999,601 1,975,757
Loans 1,802,217 1,733,538 1,705,716 1,684,518 1,646,786
Allowance for loan losses 25,382 25,209 25,384 25,302 24,766
Deposits 1,836,137 1,793,053 1,763,390 1,772,693 1,760,813
Stockholders’ equity 280,197 278,556 276,028 273,117 279,505
Stockholders’ equity / assets 12.19 % 12.50 % 12.57 % 12.41 % 12.83 %
Goodwill     61,798       61,798       61,525       61,525       61,525  
Average Balances
Total assets $ 2,276,060 $ 2,222,843 $ 2,212,603 $ 2,179,576 $ 2,184,792
Earning assets 2,051,331 2,000,284 1,991,830 1,958,463 1,964,074
Loans 1,732,472 1,696,370 1,673,750 1,647,059 1,615,657
Deposits and interest-bearing liabilities 1,967,199 1,918,587 1,909,372 1,871,871 1,879,918
Deposits 1,823,396 1,786,814 1,780,912 1,760,383 1,764,908
Stockholders’ equity 279,192 277,235 274,239 279,917 278,944
Stockholders’ equity / assets     12.27 %     12.47 %     12.39 %     12.84 %     12.77 %
Per Common Share Data
Net Income:
Basic $ 0.72 $ 0.72 $ 0.71 $ 0.71 $ 0.68
Diluted 0.71 0.72 0.70 0.69 0.65
Dividends 0.20 0.20 0.200 0.175 0.175
Market Value:
High $ 42.46 $ 39.95 $ 38.21 $ 34.64 $ 35.70
Low 35.01 35.03 32.42 29.05 26.95
Close 37.78 36.56 37.53 32.82 34.06
Common Book Value 30.78 30.37 29.76 29.53 30.17
Shares outstanding, end of period (in thousands)     9,102       9,172       9,275       9,248       9,235  
Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.77 % 3.78 % 3.81 % 3.88 % 3.76 %
Return on average assets 1.14 % 1.20 % 1.19 % 1.23 % 1.15 %
Return on average equity 9.33 % 9.58 % 9.60 % 9.56 % 9.04 %
Efficiency ratio (2) 63.88 % 62.41 % 63.02 % 62.73 % 65.51 %
Effective tax rate 29.48 % 30.93 % 30.02 % 30.18 % 23.54 %
Common dividend payout ratio (basic)     27.78 %     27.78 %     28.17 %     24.65 %     25.74 %
 

(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 2015   3rd Qtr 2015   2nd Qtr 2015   1st Qtr 2015   4th Qtr 2014
Loan Portfolio Composition
One to four family residential real estate $ 205,330 $ 205,370 $ 205,044 $ 203,558 $ 206,437
Construction 163,877 129,230 140,114 125,144 112,385
Commercial real estate 948,428 922,207 885,125 876,476 840,488
Commercial 419,349 402,681 401,247 395,378 399,730
Consumer finance 16,281 15,774 14,911 14,967 15,466
Home equity and improvement   116,962       113,781       109,694       110,755       111,813  
Total loans 1,870,227 1,789,043 1,756,135 1,726,278 1,686,319
Less:
Loans in process 66,902 54,484 49,477 40,833 38,653
Deferred loan origination fees 1,108 1,021 942 927 880
Allowance for loan loss   25,382       25,209       25,384       25,302       24,766  
Net Loans $ 1,776,835     $ 1,708,329     $ 1,680,332     $ 1,659,216     $ 1,622,020  
                     
Allowance for loan loss activity
Beginning allowance $ 25,209 $ 25,384 $ 25,302 $ 24,766 $ 24,567
Provision for loan losses 43 (27 ) 0 120 162
Credit loss charge-offs:
One to four family residential real estate 8 185 11 78 61
Commercial real estate 103 64 146 155 505
Commercial - 43 23 2 212
Consumer finance 32 5 13 3 1
Home equity and improvement   10       110       187       43       87  
Total charge-offs 153 407 380 281 866
Total recoveries   282       259       462       697       903  
Net charge-offs (recoveries)   (129 )     148       (82 )     (416 )     (37 )
Ending allowance $ 25,382     $ 25,209     $ 25,384     $ 25,302     $ 24,766  
                     
Credit Quality
Total non-performing loans (1) $ 16,261 $ 16,612 $ 16,737 $ 18,703 $ 24,130
Real estate owned (REO)   1,321       4,936       5,371       6,392       6,181  
Total non-performing assets (2) $ 17,582     $ 21,548     $ 22,108     $ 25,095     $ 30,311  
Net charge-offs (recoveries) (129 ) 148 (82 ) (416 ) (37 )
 
Restructured loans, accruing (3) 11,178 13,786 22,234 19,616 24,686
 
Allowance for loan losses / loans 1.41 % 1.45 % 1.49 % 1.50 % 1.50 %
Allowance for loan losses / non-performing assets 144.36 % 116.99 % 114.82 % 100.82 % 81.71 %
Allowance for loan losses / non-performing loans 156.09 % 151.75 % 151.66 % 135.28 % 102.64 %
Non-performing assets / loans plus REO 0.97 % 1.24 % 1.29 % 1.48 % 1.83 %
Non-performing assets / total assets 0.77 % 0.97 % 1.01 % 1.14 % 1.39 %
Net charge-offs / average loans (annualized) -0.03 % 0.03 % -0.02 % -0.10 % -0.01 %
                     
Deposit Balances
Non-interest-bearing demand deposits $ 420,691 $ 392,103 $ 378,970 $ 370,997 $ 379,552
Interest-bearing demand deposits and money market 767,201 745,233 722,813 737,533 727,729
Savings deposits 219,655 216,613 218,055 215,590 203,673
Retail time deposits less than $100,000 278,707 282,331 284,471 286,890 286,904
Retail time deposits greater than $100,000   149,883       156,773       159,081       161,683       162,955  
Total deposits $ 1,836,137     $ 1,793,053     $ 1,763,390     $ 1,772,693     $ 1,760,813  
 

(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.
       
 
(dollars in thousands)   Total Balance   Current  

30 to 89 days
past due

  

Non Accrual
Loans

 
December 31, 2015                
One to four family residential real estate $ 205,330 $ 201,806 $ 914 $ 2,610
Construction 163,877 163,877 - -
Commercial real estate 948,428 937,844 736 9,848
Commercial 419,349 416,114 157 3,078
Consumer finance 16,281 16,215 30 36
Home equity and improvement   116,962     115,465     808     689
Total loans $ 1,870,227   $ 1,851,321   $ 2,645   $ 16,261
 
September 30, 2015                
One to four family residential real estate $ 205,370 $ 201,797 $ 828 $ 2,745
Construction 129,230 129,095 135 -
Commercial real estate 922,207 911,878 239 10,090
Commercial 402,681 399,547 17 3,117
Consumer finance 15,774 15,676 69 29
Home equity and improvement   113,781     112,620     530     631
Total loans $ 1,789,043   $ 1,770,613   $ 1,818   $ 16,612
 
December 31, 2014                
One to four family residential real estate $ 206,437 $ 201,931 $ 1,174 $ 3,332
Construction 112,385 112,385 - -
Commercial real estate 840,488 824,770 544 15,174
Commercial 399,730 394,671 66 4,993
Consumer finance 15,466 15,330 124 12
Home equity and improvement   111,813     109,993     1,201     619
Total loans $ 1,686,319   $ 1,659,080   $ 3,109   $ 24,130