Skip to Main Content Skip to Sitemap

Press Release

First Defiance Financial Corp. Reports Record Full Year Earnings of $2.26 Per Share for 2018

Company Release - 1/21/2019 5:15 PM ET
  • Earnings per diluted share of $0.59 for 2018 fourth quarter, up from $0.46 per share in the 2017 fourth quarter
  • Quarterly dividend increased 11.8% to $0.19 per share
  • Net income of $12.1 million for 2018 fourth quarter, compared to $9.4 million in the 2017 fourth quarter
  • Net interest margin of 4.02% for the 2018 fourth quarter, compared to 3.88% in the 2017 fourth quarter
  • Loan growth of $83.7 million during the 2018 fourth quarter
  • Deposit growth of $96.5 million during the 2018 fourth quarter
  • Non-performing loans of $19.0 million for 2018 fourth quarter, compared to $30.7 million for the 2017 fourth quarter

DEFIANCE, Ohio--(BUSINESS WIRE)-- First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the fiscal year ended December 31, 2018, totaled $46.2 million, or $2.26 per diluted common share, compared to $32.3 million, or $1.61 per diluted common share, for the year ended December 31, 2017. For the fourth quarter of 2018, First Defiance earned $12.1 million, or $0.59 per diluted common share, compared to $9.4 million, or $0.46 per diluted common share for the fourth quarter of 2017. The fourth quarter of 2018 results included an increase of $806,000 pre-tax ($636,000 after-tax), or $0.03 per diluted share, from an immaterial accounting correction related to the company’s deferred compensation plan.

“With fourth quarter earnings per share up 28% over last year, we are pleased to announce our sixth consecutive year of record earnings performance,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance. “Our balance sheet and earnings growth, net interest margin expansion and asset quality improvement supported a strong finish to the year and positions us well as we start the new year.”

Net interest income up compared to fourth quarter 2017

Net interest income of $28.5 million in the fourth quarter of 2018 was up from $25.4 million in the fourth quarter of 2017. The increase was primarily due to the growth in earning assets supplemented by expansion in the net interest margin versus the fourth quarter last year. The net interest margin was 4.02% for the fourth quarter, up from 4.00% for the third quarter of 2018 and 3.88% in the fourth quarter of 2017. Yield on interest earning assets increased by 38 basis points, to 4.73% in the fourth quarter of 2018 from 4.35% in the fourth quarter of 2017. The cost of interest-bearing liabilities increased by 33 basis points in the fourth quarter of 2018 to 0.95% from 0.62% in the fourth quarter of 2017.

“Our net interest income increase in the fourth quarter was driven by both solid balance sheet growth and margin expansion,” said Hileman. “Our loans and deposits grew in the fourth quarter at annualized rates of 13.6% and 15.3%, respectively, providing strong momentum for 2019.”

Non-interest income down from fourth quarter 2017

First Defiance’s non-interest income for the fourth quarter of 2018 was $8.4 million compared to $9.9 million in the fourth quarter of 2017. Results for the fourth quarter of 2018 included a $690,000 decrease in deferred compensation plan assets compared to a $170,000 increase for the same period in 2017 due to stock market performance. In addition, fourth quarter of the prior year included an increase in trust income of $428,000 attributable to a change to accrual basis accounting.

Mortgage banking income was $1.4 million in the fourth quarter of 2018, down from $1.7 million in the fourth quarter of 2017 due to lower volumes. Gains from the sale of mortgage loans decreased in the fourth quarter of 2018 to $758,000 from $1.1 million in the fourth quarter of 2017. Mortgage loan servicing revenue was $978,000 in the fourth quarter of 2018, up from $945,000 in the fourth quarter of 2017. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $41,000 in the fourth quarter of 2018 compared to a positive adjustment of $69,000 in the fourth quarter of 2017.

For the fourth quarter of 2018, service fees and other charges were $3.3 million, up from $3.1 million in the fourth quarter of 2017; and commissions from the sale of insurance products were $3.1 million, up from $3.0 million in the fourth quarter of 2017. Trust income was $503,000 in the fourth quarter of 2018 and consistent with $932,000 in the fourth quarter of 2017, which included $428,000 for an adjustment to accrual basis accounting. The fourth quarter of 2018 included gains of $97,000 from the sale of securities compared to gains of $160,000 in the fourth quarter of 2017.

Other non-interest income for the fourth quarter of 2018 was a negative $494,000 down $999,000 compared to 2017 primarily due to the decrease in deferred compensation plan assets described above. Excluding the impact of this item, other non-interest income for fourth quarter 2018 would be $196,000 compared to $335,000 in the fourth quarter of 2017.

Non-interest expenses up from fourth quarter 2017

Non-interest expense totaled $21.2 million in the fourth quarter of 2018 compared to $21.1 million in the fourth quarter of 2017, primarily due to increases in core non-interest expenses offset by a decrease in other non-interest expenses. The comparison includes an $806,000 reduction in expenses from the accounting correction to the company’s deferred compensation plan in the fourth quarter of 2018, and a further impact from a $1.3 million decrease in deferred compensation plan expense due to stock market performance. Compensation and benefits in the fourth quarter of 2018 was $13.5 million, an increase of $1.3 million compared to the fourth quarter of 2017. Occupancy expense was $2.4 million in the fourth quarter 2018, up $433,000 from the fourth quarter 2017. Data processing cost was $2.2 million in the fourth quarter of 2018, up $301,000 from the fourth quarter of 2017.

Other non-interest expense was $2.0 million (or $2.8 million excluding the benefit from the deferred compensation accounting correction) in the fourth quarter of 2018 compared to $4.0 million in the fourth quarter of 2017. Additionally, results for the fourth quarter of 2018 included a $1,052,000 decrease in deferred compensation plan liabilities compared to a $200,000 increase for the same period in 2017 due to stock market performance. Excluding the impact of these items, other non-interest expense for fourth quarter 2018 would be $3.9 million compared to $3.8 million in the fourth quarter of 2017.

Credit quality

Non-performing loans totaled $19.0 million at December 31, 2018, a decrease from $30.7 million at December 31, 2017. In addition, real estate owned totaled $1.2 million at December 31, 2018, down from $1.5 million at December 31, 2017. Accruing troubled debt restructured loans were $11.6 million at December 31, 2018, a decrease from $13.8 million at December 31, 2017.

The fourth quarter of 2018 results include net recoveries of $220,000 and a provision for loan losses of $472,000 compared with net recoveries of $28,000 and a provision of $314,000 for the same period in 2017. The allowance for loan loss as a percentage of total loans was 1.12% at December 31, 2018, compared with 1.13% at September 30, 2018, and 1.14% at December 31, 2017.

“Our non-performing assets to total assets at year-end improved significantly from the prior year to 0.64%; and as a continuation of our favorable net loan loss experience from the previous quarter, net recoveries were $220,000 in the fourth quarter,” said Hileman. “Additional reductions in our non-performing assets remain a priority in 2019.”

Annual results

Net income for the full year ended on December 31, 2018, totaled $46.2 million, or $2.26 per diluted common share, compared to $32.3 million, or $1.61 per diluted common share for 2017. The year 2017 included approximately ten months of operations of the Commercial Savings Bank (“CSB”) acquisition completed on February 24, 2017, and nine months of operations from Corporate One Benefits Agency, Inc. (“Corporate One”) acquired on April 1, 2017. In addition, 2017 included merger and conversion expenses related to the acquisitions of $4.0 million, which had an after tax impact of $2.8 million, or $0.14 per diluted share. The year 2018 included a benefit of $806,000 from an accounting correction, which had an after tax impact of $636,000 or $0.03 per diluted share.

Net interest income for 2018 totaled $108.3 million, compared with $96.7 million for 2017. Average interest-earning assets increased to $2.74 billion for 2018, compared to $2.55 billion in 2017. Net interest margin for 2018 was 3.98%, up 10 basis points from the 3.88% margin for 2017. The provision for loan losses for 2018 was $1.2 million, compared to $2.9 million for 2017.

Non-interest income for the year 2018 was $39.2 million, compared to $40.1 million in 2017. The year 2017 included the operating results from the CSB and Corporate One mergers completed in 2017, a $1.5 million enhancement value gain related to the purchase of bank owned life insurance in the first quarter of 2017, and an increase in trust revenues of $428,000 related to a change to accrual basis accounting.

Service fees and other charges were $13.1 million for 2018, up from $12.1 million in 2017. Mortgage banking income remained stable at $7.1 million for 2018, compared to $7.0 million in 2017. Gains on the sale of non-mortgage loans were $317,000 for 2018, compared to $217,000 in 2017. Insurance commissions increased to $14.1 million for 2018, compared to $12.9 million in 2017. Non-interest income for 2018 included $173,000 of net securities gains compared to $584,000 of net securities gains for 2017.

Non-interest expense increased to $89.4 million in 2018 from $85.4 million in 2017. Included in non-interest expense for 2017 were merger and conversion expenses of $4.0 million related to acquisitions. Compensation and benefits expense was $52.6 million for 2018 compared to $49.8 million for 2017. Expenses also included increases in occupancy expense of $934,000 and data processing expense of $818,000. Other non-interest expense was $15.2 million (or $16.0 million excluding the benefit from the deferred compensation accounting correction) in 2018 compared to $15.7 million in 2017.

Total assets at $3.18 billion

Total assets at December 31, 2018, were $3.18 billion compared to $2.99 billion at December 31, 2017. Net loans receivable (excluding loans held for sale) were $2.51 billion at December 31, 2018, compared to $2.32 billion at December 31, 2017. Also, at December 31, 2018, goodwill and other intangible assets totaled $103.0 million compared to $104.3 million at December 31, 2017.

Total deposits at December 31, 2018, were $2.62 billion compared with $2.44 billion at December 31, 2017. Total stockholders’ equity was $399.6 million at December 31, 2018, compared to $373.3 million at December 31, 2017.

Dividend to be paid February 22

The Board of Directors declared a quarterly cash dividend of $0.19 per common share payable February 22, 2019, to shareholders of record at the close of business on February 15, 2019. The dividend represents an annual dividend of 2.81% based on the First Defiance common stock closing price on January 18, 2019. First Defiance has approximately 20,196,026 common shares outstanding.

Share Repurchase Program

Under its existing authorization to repurchase shares, the company completed the repurchase of 231,000 shares of its common stock during the fourth quarter of 2018. At year-end, 524,000 shares of common stock remained available for repurchase under the authorization. Repurchases will be made periodically depending on market conditions and other factors. The repurchased shares will be held as treasury stock and will be available for general corporate purposes, including employee stock option plans. The exact number of shares to be repurchased by the company is not guaranteed.

Purchases under the First Defiance Financial Corp. stock repurchase program may be made periodically, in the open market, through block trades and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Commission or otherwise, and also in privately negotiated transactions. Depending on market conditions and other factors, these purchases may be commenced or suspended at any time or periodically without prior notice.

Conference call

First Defiance will host a conference call at 11:00 a.m. ET on Tuesday, January 22, 2019, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. A live webcast may also be accessed at https://services.choruscall.com/links/fdef190122.html. The replay of the conference call webcast will be available at www.fdef.com until 9:00 a.m. ET on Wednesday, January 22, 2020.

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 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 company’s 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 December 31, 2018 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)   2018   2017
 
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions $ 55,962 $ 58,693
Interest-bearing deposits   43,000     55,000  
98,962 113,693
Securities
Available-for sale, carried at fair value 294,076 260,650
Held-to-maturity, carried at amortized cost   526     648  
294,602 261,298
 
Loans 2,540,039 2,348,713
Allowance for loan losses   (28,331 )   (26,683 )
Loans, net 2,511,708 2,322,030
Loans held for sale 6,613 10,435
Mortgage servicing rights 10,119 9,808
Accrued interest receivable 9,641 8,706
Federal Home Loan Bank stock 14,217 15,992
Bank Owned Life Insurance 67,660 66,230
Office properties and equipment 40,670 40,217
Real estate and other assets held for sale 1,205 1,532
Goodwill 98,569 98,569
Core deposit and other intangibles 4,391 5,703
Deferred taxes 654 231
Other assets   23,365     38,959  
Total Assets $ 3,182,376   $ 2,993,403  
 
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits $ 607,198 $ 571,360

Interest-bearing deposits

  2,013,684     1,866,296  
Total deposits 2,620,882 2,437,656
Advances from Federal Home Loan Bank 85,189 84,279
Notes payable and other interest-bearing liabilities 5,741 26,019
Subordinated debentures 36,083 36,083
Advance payments by borrowers for tax and insurance 3,652 2,925
Other liabilities   31,240     33,155  
Total Liabilities 2,782,787 2,620,117
Stockholders’ Equity
Preferred stock - -
Common stock, net 127 127
Additional paid-in-capital 161,593 160,940
Accumulated other comprehensive income (loss) (2,148 ) 217
Retained earnings 295,588 262,900
Treasury stock, at cost   (55,571 )   (50,898 )
Total stockholders’ equity   399,589     373,286  
Total Liabilities and Stockholders’ Equity $ 3,182,376   $ 2,993,403  
 
 
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)   2018   2017 2018   2017
Interest Income:    
Loans $ 30,841 $ 26,277 $ 114,398 $ 99,540
Investment securities 2,167 1,747 8,134 6,942
Interest-bearing deposits 325 281 1,270 836
FHLB stock dividends   217     222   915   784
Total interest income 33,550 28,527 124,717 108,102
Interest Expense:
Deposits 4,389 2,461 13,897 8,818
FHLB advances and other 318 352 1,261 1,470
Subordinated debentures 347 252 1,281 935
Notes Payable   4     75   23   208
Total interest expense   5,058     3,140   16,462   11,431
Net interest income 28,492 25,387 108,255 96,671
Provision for loan losses   472     314   1,176   2,949
Net interest income after provision for loan losses 28,020 25,073 107,079 93,722
Non-interest Income:
Service fees and other charges 3,338 3,066 13,100 12,139
Mortgage banking income 1,445 1,738 7,077 7,004
Gain on sale of non-mortgage loans 17 45 317 217
Gain on sale of securities 97 160 173 584
Insurance commissions 3,061 3,032 14,085 12,866
Trust income 503 932 2,091 2,332
Income from Bank Owned Life Insurance 402 419 1,767 3,085
Other non-interest income   (494 )   505   598   1,854
Total Non-interest Income 8,369 9,897 39,208 40,081
Non-interest Expense:
Compensation and benefits 13,550 12,259 52,566 49,847
Occupancy 2,390 1,957 8,641 7,707
FDIC insurance premium 204 277 1,021 1,250
Financial institutions tax 525 400 2,118 1,819
Data processing 2,206 1,905 8,555 7,737
Amortization of intangibles 314 358 1,312 1,289
Other non-interest expense   2,021     3,985   15,199   15,702
Total Non-interest Expense   21,210     21,141   89,412   85,351
Income before income taxes 15,179 13,829 56,875 48,452
Income taxes   3,082     4,430   10,626   16,184
Net Income $ 12,097   $ 9,399 $ 46,249 $ 32,268
 
 
Earnings per common share:
Basic $ 0.60 $ 0.47 $ 2.27 $ 1.62
Diluted $ 0.59 $ 0.46 $ 2.26 $ 1.61
 
Average Shares Outstanding:
Basic 20,313 20,310 20,358 19,950
Diluted 20,404 20,444 20,449 20,068
 
 
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)   2018   2017   % change   2018   2017   % change
Summary of Operations        
 
Tax-equivalent interest income (2) $ 33,808 $ 29,009 16.5 % $ 125,721 $ 110,016 14.3 %
Interest expense 5,058 3,140 61.1 16,462 11,431 44.0
Tax-equivalent net interest income (2) 28,750 25,869 11.1 109,259 98,585 10.8
Provision for loan losses 472 314 50.3 1,176 2,949 (60.1 )
Tax-equivalent NII after provision for loan loss (2) 28,278 25,555 10.7 108,083 95,636 13.0
Investment securities gains 97 160 (39.4 ) 173 584 (70.4 )
Non-interest income (excluding securities gains/losses) 8,272 9,737 (15.0 ) 39,035 39,497 (1.2 )
Non-interest expense 21,210 21,141 0.3 89,412 85,351 4.8
Income taxes 3,082 4,430 (30.4 ) 10,626 16,184 (34.3 )
Net Income 12,097 9,399 28.7 46,249 32,268 43.3
Tax equivalent adjustment (2)     258       482     (46.5 )     1,004       1,914     (47.5 )
At Period End
Assets 3,182,376 2,993,403 6.3
Earning assets 2,898,471 2,691,438 7.7
Loans 2,540,039 2,348,713 8.1
Allowance for loan losses 28,331 26,683 6.2
Deposits 2,620,882 2,437,656 7.5
Stockholders’ equity     399,589       373,286     7.0              
Average Balances
Assets 3,138,202 2,968,445 5.7 3,048,525 2,851,531 6.9
Earning assets 2,831,866 2,646,643 7.0 2,741,215 2,545,261 7.7
Loans 2,474,221 2,279,358 8.5 2,382,941 2,198,639 8.4
Deposits and interest-bearing liabilities 2,705,736 2,560,258 5.7 2,626,004 2,464,952 6.5
Deposits 2,594,635 2,400,061 8.1 2,507,553 2,298,712 9.1
Stockholders’ equity 392,701 369,366 6.3 384,305 351,236 9.4
Stockholders’ equity / assets     12.51 %     12.44 %   0.6       12.61 %     12.32 %   2.3  
Per Common Share Data
Net Income
Basic $ 0.60 $ 0.47 29.0 $ 2.27 $ 1.62 40.6
Diluted 0.59 0.46 28.3 2.26 1.61 40.4
Dividends 0.17 0.13 36.0 0.64 0.50 28.0
Market Value:
High $ 31.09 $ 28.46 9.3 $ 35.00 $ 28.46 23.0
Low 22.78 25.14 (9.4 ) 22.78 23.14 (1.5 )
Close 24.51 25.99 (5.7 ) 24.51 25.99 (5.7 )
Common Book Value 19.81 18.38 7.8 19.81 18.38 7.8
Tangible Common Book Value (1) 14.71 13.24 11.0 14.71 13.24 11.0
Shares outstanding, end of period (000)     20,171       20,312     (0.7 )     20,171       20,312     (0.7 )
Performance Ratios (annualized)
Tax-equivalent net interest margin (2) 4.02 % 3.88 % 3.5 3.98 % 3.88 % 2.6
Return on average assets 1.53 % 1.26 % 21.7 1.52 % 1.13 % 34.1
Return on average equity 12.22 % 10.10 % 21.1 12.03 % 9.19 % 31.0
Efficiency ratio (3) 57.29 % 59.37 % (3.5 ) 60.29 % 61.81 % (2.5 )
Effective tax rate 20.30 % 32.03 % (36.6 ) 18.68 % 33.40 % (44.1 )
Dividend payout ratio (basic)     28.33 %     26.88 %   5.4       28.19 %     30.96 %   (8.9 )

(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 Twelve Months Ended

December 31,

December 31,

(dollars in thousands)   2018   2017   2018   2017
 
Gain from sale of mortgage loans $ 758 $ 1,087 $ 4,502 $ 4,664
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue 978 945 3,784 3,714
Amortization of mortgage servicing rights (332 ) (363 ) (1,341 ) (1,464 )
Mortgage servicing rights valuation adjustments   41       69     132       90  
  687       651     2,575       2,340  
Total revenue from sale and servicing of mortgage loans $ 1,445     $ 1,738   $ 7,077     $ 7,004  
 
               
Yield Analysis
First Defiance Financial Corp.
 
Three Months Ended December 31,
(dollars in thousands)
2018 2017
Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets:
Loans receivable $ 2,474,221 $ 30,867 4.95 % $ 2,279,358 $ 26,327 4.58 %
Securities 289,233 2,399 3.22 %

(3

) 261,328 2,179 3.35 %

(3

)

Interest Bearing Deposits 54,195 325 2.38 % 89,965 281 1.24 %
FHLB stock   14,217   217 6.06 %   15,992   222 5.51 %
Total interest-earning assets 2,831,866 33,808 4.73 % 2,646,643 29,009 4.35 %
Non-interest-earning assets   306,336   321,802
Total assets $ 3,138,202 $ 2,968,445
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 2,002,541 $ 4,389 0.87 % $ 1,847,837 $ 2,461 0.53 %
FHLB advances and other 69,782 318 1.81 % 94,773 352 1.47 %
Subordinated debentures 36,083 347 3.82 % 36,161 252 2.76 %
Notes payable   5,236   4 0.30 %   29,263   75 1.02 %
Total interest-bearing liabilities 2,113,642 5,058 0.95 % 2,008,034 3,140 0.62 %
Non-interest bearing deposits   592,094   - -   552,224   - -
Total including non-interest-bearing demand deposits 2,705,736 5,058 0.74 % 2,560,258 3,140 0.49 %
Other non-interest-bearing liabilities   39,765   38,821
Total liabilities 2,745,501 2,599,079
Stockholders' equity   392,701   369,366
Total liabilities and stockholders' equity $ 3,138,202   $ 2,968,445  
Net interest income; interest rate spread $ 28,750 3.78 % $ 25,869 3.73 %
Net interest margin (4) 4.02 % 3.88 %
Average interest-earning assets to average interest bearing liabilities 134 % 132 %
 
Twelve Months Ended December 31,
2018 2017
Average Yield Average Yield
Balance Interest(1) Rate Balance Interest(1) Rate
Interest-earning assets:
Loans receivable $ 2,382,941 $ 114,500 4.80 % $ 2,198,639 $ 99,742 4.54 %
Securities 279,867 9,036 3.23 % (3 ) 258,775 8,654 3.39 %

(3

)

Interest Bearing Deposits 63,261 1,270 2.01 % 72,215 836 1.16 %
FHLB stock   15,146   915 6.04 %   15,632   784 5.02 %
Total interest-earning assets 2,741,215 125,721 4.59 % 2,545,261 110,016 4.33 %
Non-interest-earning assets   307,310   306,270
Total assets $ 3,048,525 $ 2,851,531
Deposits and Interest-bearing liabilities:
Interest bearing deposits $ 1,945,114 $ 13,897 0.71 % $ 1,769,786 $ 8,818 0.50 %
FHLB advances and other 73,421 1,261 1.72 % 102,155 1,470 1.44 %
Subordinated debentures 36,083 1,281 3.55 % 36,156 935 2.58 %
Notes payable   8,947   23 0.26 %   27,929   208 0.74 %
Total interest-bearing liabilities 2,063,565 16,462 0.80 % 1,936,026 11,431 0.59 %
Non-interest bearing deposits   562,439   - -   528,926   - -
Total including non-interest-bearing demand deposits 2,626,004 16,462 0.63 % 2,464,952 11,431 0.46 %
Other non-interest-bearing liabilities   38,216   35,343
Total liabilities 2,664,220 2,500,295
Stockholders' equity   384,305   351,236
Total liabilities and stockholders' equity $ 3,048,525   $ 2,851,531  
Net interest income; interest rate spread $ 109,259 3.79 % $ 98,585 3.74 %
Net interest margin (4) 3.98 % 3.88 %
Average interest-earning assets to average interest bearing liabilities 133 % 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)   4th Qtr 2018   3rd Qtr 2018   2nd Qtr 2018   1st Qtr 2018   4th Qtr 2017
Summary of Operations
Tax-equivalent interest income (1) $ 33,808 $ 32,220 $ 30,550 $ 29,142 $ 29,009
Interest expense 5,058 4,434 3,752 3,218 3,140
Tax-equivalent net interest income (1) 28,750 27,786 26,798 25,924 25,869
Provision for loan losses 472 1,376 423 (1,095 ) 314
Tax-equivalent NII after provision for loan losses (1) 28,278 26,410 26,375 27,019 25,555
Investment securities gains, net of impairment 97 76 - - 160
Non-interest income (excluding securities gains/losses) 8,272 9,846 10,214 10,703 9,737
Non-interest expense 21,210 22,286 22,665 23,251 21,141
Income taxes 3,082 2,483 2,564 2,497 4,430
Net income 12,097 11,306 11,109 11,737 9,399
Tax equivalent adjustment (1)     258       257       251       237       482  
At Period End
Total assets $ 3,182,376 $ 3,098,093 $ 3,039,589 $ 3,023,004 $ 2,993,403
Earning assets 2,898,471 2,810,624 2,756,712 2,748,338 2,691,438
Loans 2,540,039 2,456,357 2,385,344 2,358,330 2,348,713
Allowance for loan losses 28,331 27,639 27,321 27,267 26,683
Deposits 2,620,882 2,524,431 2,489,128 2,491,801 2,437,656
Stockholders’ equity 399,589 393,457 386,920 379,214 373,286
Stockholders’ equity / assets 12.56 % 12.70 % 12.73 % 12.54 % 12.47 %
Goodwill     98,569       98,569       98,569       98,569       98,569  
Average Balances
Total assets $ 3,138,202 $ 3,059,225 $ 3,018,808 $ 2,977,864 $ 2,968,445
Earning assets 2,831,866 2,754,561 2,714,328 2,664,114 2,646,643
Loans 2,474,221 2,403,932 2,337,294 2,316,316 2,279,358
Deposits and interest-bearing liabilities 2,705,736 2,633,054 2,600,029 2,565,537 2,560,258
Deposits 2,594,635 2,513,708 2,487,430 2,434,440 2,400,061
Stockholders’ equity 392,701 389,361 381,165 373,993 369,366
Stockholders’ equity / assets     12.51 %     12.73 %     12.63 %     12.56 %     12.44 %
Per Common Share Data
Net Income:
Basic $ 0.60 $ 0.55 $ 0.54 $ 0.58 $ 0.47
Diluted 0.59 0.55 0.54 0.58 0.46
Dividends 0.17 0.17 0.15 0.15 0.125
Market Value:
High $ 31.09 $ 35.00 $ 33.72 $ 29.93 $ 28.46
Low 22.78 29.61 27.63 25.51 25.14
Close 24.51 30.11 33.53 28.66 25.99
Common Book Value 19.81 19.29 18.97 18.62 18.38
Shares outstanding, end of period (in thousands)     20,171       20,396       20,396       20,364       20,312  
Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 4.02 % 4.00 % 3.95 % 3.95 % 3.88 %
Return on average assets 1.53 % 1.47 % 1.48 % 1.60 % 1.26 %
Return on average equity 12.22 % 11.52 % 11.69 % 12.73 % 10.10 %
Efficiency ratio (2) 57.29 % 59.22 % 61.24 % 63.48 % 59.37 %
Effective tax rate 20.30 % 18.01 % 18.75 % 17.54 % 32.03 %
Common dividend payout ratio (basic)     28.33 %     30.91 %     27.78 %     26.09 %     26.88 %

(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)   4th Qtr 2018   3rd Qtr 2018   2nd Qtr 2018   1st Qtr 2018   4th Qtr 2017
Loan Portfolio Composition
One to four family residential real estate $ 322,686 $ 313,300 $ 307,480 $ 275,547 $ 274,862
Construction 265,772 274,344 283,911 251,944 265,476
Commercial real estate 1,404,810 1,363,087 1,283,698 1,282,027 1,235,221
Commercial 509,577 489,393 489,296 500,496 526,142
Consumer finance 34,405 32,379 29,724 28,035 29,109
Home equity and improvement   128,152       129,295       129,868       133,407       135,457  
Total loans 2,665,402 2,601,798 2,523,977 2,471,456 2,466,267
Less:
Undisbursed loan funds 123,293 143,286 136,563 111,450 115,972
Deferred loan origination fees 2,070 2,155 2,070 1,676 1,582
Allowance for loan loss   28,331       27,639       27,321       27,267       26,683  
Net Loans $ 2,511,708     $ 2,428,718     $ 2,358,023     $ 2,331,063     $ 2,322,030  
                     
Allowance for loan loss activity
Beginning allowance $ 27,639 $ 27,321 $ 27,267 $ 26,683 $ 26,341
Provision for loan losses 472 1,376 423 (1,095 ) 314
Credit loss charge-offs:
One to four family residential real estate 31 136 78 16 170
Commercial real estate 30 1,048 254 55 29
Commercial 15 528 84 97 210
Consumer finance 105 25 72 31 27
Home equity and improvement   75       36       41       117       55  
Total charge-offs 256 1,773 529 316 491
Total recoveries   476       715       160       1,995       519  
Net charge-offs (recoveries)   (220 )     1,058       369       (1,679 )     (28 )
Ending allowance $ 28,331     $ 27,639     $ 27,321     $ 27,267     $ 26,683  
                     
Credit Quality
Total non-performing loans (1) $ 19,016 $ 20,929 $ 18,340 $ 27,925 $ 30,715
Real estate owned (REO)   1,205       1,676       1,795       1,440       1,532  
Total non-performing assets (2) $ 20,221     $ 22,605     $ 20,135     $ 29,365     $ 32,247  
Net charge-offs (recoveries) (220 ) 1,058 369 (1,679 ) (28 )
 
Restructured loans, accruing (3) 11,573 12,611 15,834 13,722 13,770
 
Allowance for loan losses / loans 1.12 % 1.13 % 1.15 % 1.16 % 1.14 %
Allowance for loan losses / non-performing assets 140.11 % 122.27 % 135.69 % 92.86 % 82.75 %
Allowance for loan losses / non-performing loans 148.99 % 132.06 % 148.97 % 97.64 % 86.87 %
Non-performing assets / loans plus REO 0.80 % 0.92 % 0.84 % 1.24 % 1.37 %
Non-performing assets / total assets 0.64 % 0.73 % 0.66 % 0.97 % 1.08 %
Net charge-offs / average loans (annualized) -0.04 % 0.18 % 0.06 % -0.29 % 0.00 %
                     
Deposit Balances
Non-interest-bearing demand deposits $ 607,198 $ 556,316 $ 548,147 $ 550,742 $ 571,360
Interest-bearing demand deposits and money market 1,040,471 1,016,294 1,021,445 1,055,416 1,005,519
Savings deposits 292,829 293,359 297,870 306,510 302,022
Retail time deposits less than $250,000 591,822 564,379 547,871 512,746 504,912
Retail time deposits greater than $250,000   88,562       94,083       73,795       66,387       53,843  
Total deposits $ 2,620,882     $ 2,524,431     $ 2,489,128     $ 2,491,801     $ 2,437,656  

(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
 
December 31, 2018                
One to four family residential real estate $ 322,686 $ 317,740 $ 1,306 $ 3,640
Construction 265,772 265,772 - -
Commercial real estate 1,404,810 1,394,211 242 10,357
Commercial 509,577 504,884 193 4,500
Consumer finance 34,405 34,079 200 126
Home equity and improvement   128,152     126,188     1,571     393
Total loans $ 2,665,402   $ 2,642,874   $ 3,512   $ 19,016
 
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

Donald P. Hileman
President and CEO
(419) 782-5104
dhileman@first-fed.com

Source: First Defiance Financial Corp.