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Press Release

First Defiance Financial Corp. Announces 2019 Third Quarter Earnings

Company Release - 10/21/2019 5:56 PM ET
  • Quarterly dividend increased 29.4% to $0.22 per share, up from $0.17 per share paid in the 2018 fourth quarter
  • Diluted earnings per share of $0.66 for the 2019 third quarter, up from $0.55 in the 2018 third quarter
  • Net income of $13.2 million for the 2019 third quarter, up from $11.3 million in the 2018 third quarter
  • Return on average assets of 1.58% for the 2019 third quarter, up from 1.47% in the 2018 third quarter
  • Loan growth of $41 million during the 2019 third quarter
  • Deposit growth of $80 million during the 2019 third quarter
  • Non-performing assets of $14.7 million for the 2019 third quarter, compared to $22.6 million for 2018 third quarter
  • Announces strategic merger with UCFC and a Trust acquisition

DEFIANCE, Ohio--(BUSINESS WIRE)-- First Defiance Financial Corp. (NASDAQ: FDEF) announced today its unaudited financial results for the three- and nine-month periods ended September 30, 2019. Net income for the third quarter ended September 30, 2019, totaled $13.2 million, or $0.66 per diluted common share compared to $11.3 million or $0.55 per diluted common share for the quarter ended September 30, 2018. Net income for the nine months ended September 30, 2019, totaled $36.9 million, or $1.85 per diluted common share compared to $34.2 million or $1.67 per diluted common share for the quarter ended September 30, 2018. The year-to-year comparison is impacted by the current year’s results, including merger-related costs, which had an after tax cost of $427,000, or $0.02 per diluted share.

“Our third quarter results reflect our company’s continued high financial performance,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “With earnings per share up 20% from the third quarter last year, our shareholders were delivered excellent results as we grew our balance sheet and maintained strong profitability.”

Net Interest Income up Compared to Third Quarter 2018

Net interest income of $28.9 million in the third quarter of 2019 was up from $27.5 million in the third quarter of 2018. The increase was primarily due to the growth in earning assets offset partly by compression in the net interest margin versus the third quarter last year. The net interest margin was 3.88% for the third quarter of 2019, down from 4.03% in the second quarter of 2019 and 4.00% in the third quarter of 2018. Yield on interest earning assets increased by 15 basis points, to 4.78% in the third quarter of 2019 from 4.63% in the third quarter of 2018. The cost of interest-bearing liabilities increased by 35 basis points in the third quarter of 2019 to 1.20% from 0.85% in the third quarter of 2018.

“Our solid loan and core deposit growth helped generate growth in net interest income despite margin compression,” said Hileman. “Year-to-date loan growth was 6.6% annualized while deposit growth was 7.1%. This growth combined with a net interest margin that remains healthy for the quarter produced a 5% increase in our net interest income over the third quarter last year.”

Non-Interest Income up from Third Quarter 2018

First Defiance’s non-interest income for the third quarter of 2019 was $11.8 million compared with $9.9 million in the third quarter of 2018. The third quarter of 2019 included gains of $11,000 from the sale of securities compared to gains of $76,000 in the third quarter of 2018. Results for the third quarter of 2019 included $325,000 of BOLI income death benefit whereas the third quarter of 2018 included no BOLI income death benefit. Total income from BOLI was $783,000 in the third quarter of 2019, up from $399,000 in the third quarter of 2018.

Mortgage banking income was $2.8 million in the third quarter of 2019, up from $1.9 million in the third quarter of 2018. Mortgage originations totaled $126.9 million in the third quarter of 2019 compared to $74.0 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 2019 to $2.6 million from $1.3 million in the third quarter of 2018. Mortgage loan servicing revenue was $960,000 in the third quarter of 2019, up from $929,000 in the third quarter of 2018, and amortization of mortgage servicing rights increased to $579,000 from $340,000 in the third quarter last year. Valuation adjustments in the third quarter of 2019 were a negative $155,000 compared to a positive $8,000 in the third quarter of 2018.

Service fees and other charges were $4.0 million in the third quarter of 2019, up from $3.3 million in the third quarter of 2018. Insurance commissions and trust income for the third quarters 2019 and 2018 were consistent year over year at $3.3 million and $0.5 million, respectively.

“Key business lines drove our 16% growth in non-interest income over the third quarter last year, excluding BOLI death benefits,” said Hileman. “This growth was led by a 50% increase in mortgage banking and a 21% increase in services fees year over year.”

Non-Interest Expenses up from Third Quarter 2018

Total non-interest expense was $23.2 million in the third quarter of 2019, an increase from $22.3 million in the third quarter of 2018. Compensation and benefits increased to $14.1 million in the third quarter of 2019, compared to $12.9 million in the third quarter of 2018. Occupancy expense and data processing expense were $2.2 million and $1.7 million, respectively, in the third quarter of 2019, compared to $2.2 million and $2.2 million, respectively, in the third quarter of 2018. Other non-interest expense of $4.1 million in the third quarter of 2019 was up from $4.0 million in the third quarter of 2018. FDIC insurance premiums were a credit of $255,000 in the third quarter of 2019 compared to an expense of $255,000 in the third quarter of 2018 due to the receipt of small bank assessment credits. In addition, merger-related costs totaled $540,000 in the third quarter of 2019 compared to none in the prior year.

Credit Quality

Non-performing loans totaled $14.7 million at September 30, 2019, a decrease from $20.9 million at September 30, 2018. In addition, First Defiance had no real estate owned at September 30, 2019, compared to $1.7 million at September 30, 2018. Accruing troubled debt restructured loans were $10.3 million at September 30, 2019, compared with $12.6 million at September 30, 2018.

The third quarter 2019 results include net charge-offs of $11,000 and a provision for loan losses of $1.3 million compared with net charge-offs of $1.1 million and a provision of $1.4 million for the same period in 2018. The allowance for loan loss as a percentage of total loans was 1.13% at September 30, 2019, consistent with 1.13% at September 30, 2018.

“We continue to be pleased with the steady improvement in our non-performing assets,” said Hileman. “Total non-performing assets including troubled debt restructurings declined 29% from last year, now representing only 0.74% of assets compared to 1.18% a year ago.”

Year-To-Date Results

For the nine-month period ended September 30, 2019, net income totaled $36.9 million, or $1.85 per diluted common share, compared to $34.2 million, or $1.67 per diluted common share for the nine months ended September 30, 2018. The year-to-year comparison is impacted by the prior year’s results, including a significant loan recovery and a loan loss provision expense of $704,000, which had an after-tax cost of $556,000, or $0.03 per diluted share. The first nine months of 2019 included a provision for loan losses expense of $1,821,000, which had an after-tax cost of $1,439,000, or $0.07 per diluted share.

Net interest income was $86.2 million for the first nine months of 2019 compared with $79.8 million in the first nine months of 2018. Average interest-earning assets increased to $2.92 billion in the first nine months of 2019 compared to $2.71 billion in the first nine months of 2018. Net interest margin for the first nine months of 2019 was 3.98%, up one basis point from the 3.97% margin reported in the nine-month period ended September 30, 2018.

Non-interest income for the first nine months of 2019 was $33.1 million compared to $30.8 million during the same period of 2018. Results for the first nine months of 2019 included $418,000 of BOLI income death benefit compared to $168,000 for the same period in 2018.

Service fees and other charges were $10.3 million for the first nine months of 2019, up from $9.8 million during the same period of 2018. Mortgage banking income was $6.8 million for the first nine months of 2019 compared with $5.6 million during the same period of 2018. Insurance commissions were $11.0 million for the first nine months of 2019 consistent with $11.0 million for the same period of 2018. Non-interest income for the first nine months of 2019 included $11,000 of gains from the sale of securities compared with securities gains of $76,000 during the same period of 2018.

Non-interest expense was $72.3 million for the first nine months of 2019, up from $68.2 million for the same period of 2018. Compensation and benefits expense was $42.5 million for the first nine months of 2019 compared with $39.0 million during the same period of 2018. Expenses also included increases in occupancy of $500,000, merger-related costs of $540,000 and other expenses of $217,000. FDIC insurance premiums were $276,000 for the first nine months of 2019 compared to $817,000 during the same period of 2018 due to the receipt of small bank assessment credits in the third quarter of 2019.

Total Assets at $3.35 Billion

Total assets at September 30, 2019, were $3.35 billion compared to $3.18 billion at December 31, 2018, and $3.10 billion at September 30, 2018. Net loans receivable (excluding loans held for sale) were $2.64 billion at September 30, 2019, compared to $2.51 billion at December 31, 2018, and $2.43 billion at September 30, 2018. Also, at September 30, 2019, goodwill and other intangible assets totaled $104.1 million compared to $103.0 million at December 31, 2018, and $103.3 million at September 30, 2018. Total deposits at September 30, 2019, were $2.76 billion compared with $2.62 billion at December 31, 2018, and $2.52 billion at September 30, 2018.

Total stockholders’ equity was $418.0 million at September 30, 2019, compared to $399.6 million at December 31, 2018, and $393.5 million at September 30, 2018. The change in stockholders’ equity from year-end 2018 was impacted by the company’s repurchase of 515,000 shares of its common stock for $15.1 million during the first quarter of 2019. During the quarter ended June 30, 2019, the company announced a new 500,000 share repurchase plan authorization with all such shares available for repurchase as of September 30, 2019.

Strategic Mergers and Acquisitions

On September 9, 2019, First Defiance and United Community Financial Corp. (NASDAQ: UCFC) (“United Community”) announced the signing of a definitive merger agreement under which United Community will merge into First Defiance in a stock-for-stock transaction. Under the terms of the merger agreement, shareholders of United Community will receive 0.3715 shares of First Defiance common stock for each share of United Community common stock. The merger combines two complementary banking platforms, and First Defiance and United Community consider this partnership an ideal strategic, financial and operational fit, particularly given their respective strong and consistent performance over time. The pro forma combined company will have approximately $6.1 billion in assets, $5.0 billion in loans and $4.9 billion in deposits, utilizing financial information as of June 30, 2019. It will leverage the respective strengths of each institution in commercial banking, residential lending, retail banking, insurance and wealth management and better position the combined company to serve the geographies of Ohio, Michigan, Indiana, Pennsylvania and West Virginia with increased scale and expanded product offerings. The transaction is expected to close early in the first quarter of 2020, subject to the approval of shareholders of both First Defiance and United Community and regulatory approvals, as well as satisfaction or waiver of other customary closing conditions.

On September 30, 2019, First Defiance, through its wholly owned subsidiary First Federal Bank of the Midwest (“First Federal Bank”), completed the acquisition of Strategic Investment Advisors, LLC (“SIA”), a financial advisory and brokerage firm. Located in Sylvania, Ohio, with assets under management of approximately $115 million and annual revenues of approximately $0.6 million, SIA will be added to First Federal Bank’s Trust and Wealth Management platform.

Dividend to be Paid November 22

The Board of Directors declared a quarterly cash dividend of $0.22 per common share payable November 22, 2019, to shareholders of record at the close of business on November 15, 2019. This represents an increase of 15.8% from the prior quarter and 29.4% from the prior year. The dividend represents an annual dividend of 3.02 percent based on the First Defiance common stock closing price on October 18, 2019. First Defiance has approximately 19,728,588 common shares outstanding.

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, October 22, 2019, 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/fdef191022.html. The replay of the conference call webcast will be available at www.fdef.com until October 21, 2020, 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 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, 2018. 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, 2019, 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) 

2019

 

2018

  
Assets 
Cash and cash equivalents 
Cash and amounts due from depository institutions 

$

56,994

 

$

55,962

 

Interest-bearing deposits 

 

55,000

 

 

43,000

 

 

 

111,994

 

 

98,962

 

Securities 
Available-for sale, carried at fair value 

 

290,054

 

 

294,076

 

Held-to-maturity, carried at amortized cost 

 

481

 

 

526

 

 

 

290,535

 

 

294,602

 

  
Loans 

 

2,665,300

 

 

2,540,039

 

Allowance for loan losses 

 

(30,250

)

 

(28,331

)

Loans, net 

 

2,635,050

 

 

2,511,708

 

Loans held for sale 

 

22,909

 

 

6,613

 

Mortgage servicing rights 

 

9,859

 

 

10,119

 

Accrued interest receivable 

 

11,386

 

 

9,641

 

Federal Home Loan Bank stock 

 

11,915

 

 

14,217

 

Bank Owned Life Insurance 

 

75,088

 

 

67,660

 

Office properties and equipment 

 

39,911

 

 

40,670

 

Real estate and other assets held for sale 

 

-

 

 

1,205

 

Goodwill 

 

100,069

 

 

98,569

 

Core deposit and other intangibles 

 

4,052

 

 

4,391

 

Other assets 

 

37,956

 

 

23,365

 

Total Assets 

$

3,350,724

 

$

3,181,722

 

  
Liabilities and Stockholders’ Equity 
Non-interest-bearing deposits 

$

604,129

 

$

607,198

 

Interest-bearing deposits 

 

2,156,486

 

 

2,013,684

 

Total deposits 

 

2,760,615

 

 

2,620,882

 

Advances from Federal Home Loan Bank 

 

85,095

 

 

85,189

 

Notes payable and other interest-bearing liabilities 

 

2,851

 

 

5,741

 

Subordinated debentures 

 

36,083

 

 

36,083

 

Advance payments by borrowers for tax and insurance 

 

5,504

 

 

3,652

 

Deferred taxes 

 

1,871

 

 

264

 

Other liabilities 

 

40,659

 

 

30,322

 

Total Liabilities  

 

2,932,678

 

 

2,782,133

 

Stockholders’ Equity 
Preferred stock 

 

-

 

 

-

 

Common stock, net 

 

127

 

 

127

 

Additional paid-in-capital 

 

161,577

 

 

161,593

 

Accumulated other comprehensive income (loss) 

 

5,101

 

 

(2,148

)

Retained earnings 

 

321,736

 

 

295,588

 

Treasury stock, at cost 

 

(70,495

)

 

(55,571

)

Total stockholders’ equity  

 

418,046

 

 

399,589

 

Total Liabilities and Stockholders’ Equity  

$

3,350,724

 

$

3,181,722

 

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) 

2019

 

2018

 

2019

 

2018

Interest Income: 
Loans 

$

33,284

 

$

29,371

$

97,158

$

83,557

Investment securities 

 

1,952

 

 

2,077

 

6,295

 

5,967

Interest-bearing deposits 

 

312

 

 

275

 

857

 

945

FHLB stock dividends 

 

135

 

 

240

 

533

 

698

Total interest income 

 

35,683

 

 

31,963

 

104,843

 

91,167

Interest Expense: 
Deposits 

 

6,029

 

 

3,753

 

16,615

 

9,508

FHLB advances and other 

 

431

 

 

342

 

1,011

 

943

Subordinated debentures 

 

329

 

 

334

 

1,043

 

934

Notes Payable 

 

2

 

 

5

 

23

 

19

Total interest expense 

 

6,791

 

 

4,434

 

18,692

 

11,404

Net interest income 

 

28,892

 

 

27,529

 

86,151

 

79,763

Provision for loan losses 

 

1,327

 

 

1,376

 

1,821

 

704

Net interest income after provision for loan losses 

 

27,565

 

 

26,153

 

84,330

 

79,059

Non-interest Income: 
Service fees and other charges 

 

4,027

 

 

3,335

 

10,335

 

9,762

Mortgage banking income 

 

2,822

 

 

1,877

 

6,800

 

5,632

Gain on sale of non-mortgage loans 

 

105

 

 

33

 

215

 

300

Gain on sale of securities 

 

11

 

 

76

 

11

 

76

Insurance commissions 

 

3,263

 

 

3,254

 

10,994

 

11,024

Trust income 

 

511

 

 

514

 

1,510

 

1,588

Income from Bank Owned Life Insurance 

 

783

 

 

399

 

1,702

 

1,365

Other non-interest income 

 

320

 

 

434

 

1,574

 

1,092

Total Non-interest Income 

 

11,842

 

 

9,922

 

33,141

 

30,839

Non-interest Expense: 
Compensation and benefits 

 

14,061

 

 

12,882

 

42,544

 

39,016

Occupancy 

 

2,206

 

 

2,154

 

6,751

 

6,251

FDIC insurance premium 

 

(255

)

 

255

 

276

 

817

Financial institutions tax 

 

555

 

 

531

 

1,667

 

1,593

Data processing 

 

1,728

 

 

2,161

 

6,292

 

6,349

One time acquisition related charges 

 

540

 

 

-

 

540

 

-

Amortization of intangibles 

 

264

 

 

319

 

839

 

998

Other non-interest expense 

 

4,104

 

 

3,984

 

13,395

 

13,178

Total Non-interest Expense 

 

23,203

 

 

22,286

 

72,304

 

68,202

Income before income taxes 

 

16,204

 

 

13,789

 

45,167

 

41,696

Income taxes 

 

3,033

 

 

2,483

 

8,315

 

7,544

Net Income 

$

13,171

 

$

11,306

$

36,852

$

34,152

  
  
Earnings per common share: 
Basic 

$

0.67

 

$

0.55

$

1.86

$

1.68

Diluted 

$

0.66

 

$

0.55

$

1.85

$

1.67

  
Average Shares Outstanding: 
Basic 

 

19,790

 

 

20,400

 

19,862

 

20,373

Diluted 

 

19,875

 

 

20,467

 

19,943

 

20,465

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) 

2019

 

2018

 

% change

 

2019

 

2018

 

% change

Summary of Operations      
       
Tax-equivalent interest income (2) 

$

35,922

 

 

$

32,220

 

 

11.5

%

 

$

105,578

 

 

$

91,913

 

 

14.9

%

Interest expense 

 

6,791

 

 

 

4,434

 

 

53.2

 

 

 

18,692

 

 

 

11,404

 

 

63.9

 

Tax-equivalent net interest income (2) 

 

29,131

 

 

 

27,786

 

 

4.8

 

 

 

86,886

 

 

 

80,509

 

 

7.9

 

Provision for loan losses 

 

1,327

 

 

 

1,376

 

 

(3.6

)

 

 

1,821

 

 

 

704

 

 

158.7

 

Tax-equivalent NII after provision for loan loss (2) 

 

27,804

 

 

 

26,410

 

 

5.3

 

 

 

85,065

 

 

 

79,805

 

 

6.6

 

Investment securities gains 

 

11

 

 

 

76

 

 

-

 

 

 

11

 

 

 

76

 

 

-

 

Non-interest income (excluding securities gains/losses) 

 

11,831

 

 

 

9,846

 

 

20.2

 

 

 

33,130

 

 

 

30,763

 

 

7.7

 

Non-interest expense 

 

23,203

 

 

 

22,286

 

 

4.1

 

 

 

72,304

 

 

 

68,202

 

 

6.0

 

Income taxes 

 

3,033

 

 

 

2,483

 

 

22.2

 

 

 

8,315

 

 

 

7,544

 

 

10.2

 

Net Income 

 

13,171

 

 

 

11,306

 

 

16.5

 

 

 

36,852

 

 

 

34,152

 

 

7.9

 

Tax equivalent adjustment (2) 

 

239

 

 

 

257

 

 

(7.0

)

 

 

735

 

 

 

746

 

 

(1.5

)

At Period End      
Assets 

 

3,350,724

 

 

 

3,098,093

 

 

8.2

 

   
Earning assets 

 

3,045,659

 

 

 

2,810,624

 

 

8.4

 

   
Loans 

 

2,665,300

 

 

 

2,456,357

 

 

8.5

 

   
Allowance for loan losses 

 

30,250

 

 

 

27,639

 

 

9.4

 

   
Deposits 

 

2,760,615

 

 

 

2,524,431

 

 

9.4

 

   
Stockholders’ equity 

 

418,046

 

 

 

393,457

 

 

6.2

 

   
Average Balances      
Assets 

 

3,303,013

 

 

 

3,059,225

 

 

8.0

 

 

 

3,236,674

 

 

 

3,018,632

 

 

7.2

 

Earning assets 

 

2,985,498

 

 

 

2,754,561

 

 

8.4

 

 

 

2,923,809

 

 

 

2,710,998

 

 

7.8

 

Loans 

 

2,624,314

 

 

 

2,403,932

 

 

9.2

 

 

 

2,567,646

 

 

 

2,352,514

 

 

9.1

 

Deposits and interest-bearing liabilities 

 

2,843,079

 

 

 

2,633,054

 

 

8.0

 

 

 

2,788,974

 

 

 

2,599,540

 

 

7.3

 

Deposits 

 

2,718,632

 

 

 

2,513,708

 

 

8.2

 

 

 

2,679,616

 

 

 

2,478,526

 

 

8.1

 

Stockholders’ equity 

 

411,041

 

 

 

389,361

 

 

5.6

 

 

 

401,597

 

 

 

381,506

 

 

5.3

 

Stockholders’ equity / assets 

 

12.44

%

 

 

12.73

%

 

(2.2

)

 

 

12.41

%

 

 

12.64

%

 

(1.8

)

Per Common Share Data      
Net Income      
Basic 

$

0.67

 

 

$

0.55

 

 

21.8

 

 

$

1.86

 

 

$

1.68

 

 

10.7

 

Diluted 

 

0.66

 

 

 

0.55

 

 

20.0

 

 

 

1.85

 

 

 

1.67

 

 

10.8

 

Dividends 

 

0.19

 

 

 

0.17

 

 

11.8

 

 

 

0.57

 

 

 

0.47

 

 

21.3

 

Market Value:      
High 

$

29.44

 

 

$

35.00

 

 

(15.9

)

 

$

31.30

 

 

$

35.00

 

 

(10.6

)

Low 

 

25.50

 

 

 

29.61

 

 

(13.9

)

 

 

24.12

 

 

 

25.51

 

 

(5.4

)

Close 

 

28.97

 

 

 

30.11

 

 

(3.8

)

 

 

28.97

 

 

 

30.11

 

 

(3.8

)

Common Book Value 

 

21.19

 

 

 

19.29

 

 

9.8

 

 

 

21.19

 

 

 

19.29

 

 

9.8

 

Tangible Common Book Value (1) 

 

15.91

 

 

 

14.23

 

 

11.8

 

 

 

15.91

 

 

 

14.23

 

 

11.8

 

Shares outstanding, end of period (000) 

 

19,729

 

 

 

20,396

 

 

(3.3

)

 

 

19,729

 

 

 

20,396

 

 

(3.3

)

Performance Ratios (annualized)      
Tax-equivalent net interest margin (2) 

 

3.88

%

 

 

4.00

%

 

(2.9

)

 

 

3.98

%

 

 

3.97

%

 

0.2

 

Return on average assets 

 

1.58

%

 

 

1.47

%

 

7.9

 

 

 

1.52

%

 

 

1.51

%

 

0.6

 

Return on average equity 

 

12.71

%

 

 

11.52

%

 

10.4

 

 

 

12.27

%

 

 

11.97

%

 

2.5

 

Efficiency ratio (3) 

 

56.65

%

 

 

59.22

%

 

(4.3

)

 

 

60.25

%

 

 

61.29

%

 

(1.7

)

Effective tax rate 

 

18.72

%

 

 

18.01

%

 

3.9

 

 

 

18.41

%

 

 

18.09

%

 

1.7

 

Dividend payout ratio (basic) 

 

28.36

%

 

 

30.91

%

 

(8.3

)

 

 

30.65

%

 

 

27.98

%

 

9.5

 

(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%

(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) 

2019

 

2018

 

2019

 

2018

    
Gain from sale of mortgage loans 

$

2,596

 

 

$

1,280

 

$

5,672

 

 

$

3,744

 

Mortgage loan servicing revenue (expense):   
Mortgage loan servicing revenue 

 

960

 

 

 

929

 

 

2,842

 

 

 

2,806

 

Amortization of mortgage servicing rights 

 

(579

)

 

 

(340

)

 

(1,256

)

 

 

(1,009

)

Mortgage servicing rights valuation adjustments 

 

(155

)

 

 

8

 

 

(458

)

 

 

91

 

 

 

226

 

 

 

597

 

 

1,128

 

 

 

1,888

 

Total revenue from sale and servicing of mortgage loans 

$

2,822

 

 

$

1,877

 

$

6,800

 

 

$

5,632

 

Yield Analysis
First Defiance Financial Corp.
 

Three Months Ended September 30,

 
 

(dollars in thousands)

 
 

2019

 

 

 

2018

 
 

Average

 

 

 

Yield

 

 

 

Average

 

 

 

Yield

 
 

Balance

 

Interest(1)

 

Rate(2)

 

 

 

Balance

 

Interest(1)

 

Rate(2)

 
Interest-earning assets:    
Loans receivable 

$

2,624,314

$

33,306

5.04

%

  

$

2,403,932

$

29,397

4.85

%

 
Securities 

 

293,876

 

2,169

2.99

%

 

(3

)

 

 

286,507

 

2,308

3.16

%

 

(3

)

Interest Bearing Deposits 

 

55,393

 

312

2.23

%

  

 

49,734

 

275

2.19

%

 
FHLB stock 

 

11,915

 

135

4.50

%

  

 

14,388

 

240

6.62

%

 
Total interest-earning assets 

 

2,985,498

 

35,922

4.78

%

  

 

2,754,561

 

32,220

4.63

%

 
Non-interest-earning assets 

 

317,515

  

 

304,664

 
Total assets 

$

3,303,013

  

$

3,059,225

 
Deposits and Interest-bearing liabilities:    
Interest bearing deposits 

$

2,129,306

$

6,029

1.12

%

  

$

1,955,518

$

3,753

0.76

%

 
FHLB advances and other 

 

85,339

 

431

2.00

%

  

 

77,719

 

342

1.75

%

 
Subordinated debentures 

 

36,083

 

329

3.62

%

  

 

36,196

 

334

3.66

%

 
Notes payable 

 

3,025

 

2

0.26

%

  

 

5,431

 

5

0.37

%

 
Total interest-bearing liabilities 

 

2,253,753

 

6,791

1.20

%

  

 

2,074,864

 

4,434

0.85

%

 
Non-interest bearing deposits 

 

589,326

 

-

-

 

  

 

558,190

 

-

-

 

 
Total including non-interest-bearing demand deposits 

 

2,843,079

 

6,791

0.95

%

  

 

2,633,054

 

4,434

0.67

%

 
Other non-interest-bearing liabilities 

 

48,893

  

 

36,810

 
Total liabilities 

 

2,891,972

  

 

2,669,864

 
Stockholders' equity 

 

411,041

  

 

389,361

 
Total liabilities and stockholders' equity 

$

3,303,013

  

$

3,059,225

 
Net interest income; interest rate spread 

$

29,131

3.58

%

  

$

27,786

3.78

%

 
Net interest margin (4) 

3.88

%

  

4.00

%

 
Average interest-earning assets to average interest bearing liabilities 

132

%

  

133

%

 
     
 

Nine Months Ended September 30,

 
 

2019

 

 

 

2018

 
 AverageYield  AverageYield 
 BalanceInterest(1)Rate  BalanceInterest(1)Rate 
Interest-earning assets:    
Loans receivable 

$

2,567,646

$

97,227

5.06

%

  

$

2,352,514

$

83,633

4.75

%

 
Securities 

 

296,312

 

6,961

3.14

%

 

(3

)

 

 

276,745

 

6,637

3.21

%

 

(3

)

Interest Bearing Deposits 

 

47,360

 

857

2.42

%

  

 

66,283

 

945

1.91

%

 
FHLB stock 

 

12,491

 

533

5.71

%

  

 

15,456

 

698

6.04

%

 
Total interest-earning assets 

 

2,923,809

 

105,578

4.83

%

  

 

2,710,998

 

91,913

4.53

%

 
Non-interest-earning assets 

 

312,865

  

 

307,634

 
Total assets 

$

3,236,674

  

$

3,018,632

 
Deposits and Interest-bearing liabilities:    
Interest bearing deposits 

$

2,094,693

$

16,615

1.06

%

  

$

1,925,972

$

9,508

0.66

%

 
FHLB advances and other 

 

68,920

 

1,011

1.96

%

  

 

74,634

 

943

1.69

%

 
Subordinated debentures 

 

36,083

 

1,043

3.86

%

  

 

36,195

 

934

3.45

%

 
Notes payable 

 

4,355

 

23

0.71

%

  

 

10,185

 

19

0.25

%

 
Total interest-bearing liabilities 

 

2,204,051

 

18,692

1.13

%

  

 

2,046,986

 

11,404

0.74

%

 
Non-interest bearing deposits 

 

584,923

 

-

-

 

  

 

552,554

 

-

-

 

 
Total including non-interest-bearing demand deposits 

 

2,788,974

 

18,692

0.90

%

  

 

2,599,540

 

11,404

0.59

%

 
Other non-interest-bearing liabilities 

 

46,103

  

 

37,586

 
Total liabilities 

 

2,835,077

  

 

2,637,126

 
Stockholders' equity 

 

401,597

  

 

381,506

 
Total liabilities and stockholders' equity 

$

3,236,674

  

$

3,018,632

 
Net interest income; interest rate spread 

$

86,886

3.70

%

  

$

80,509

3.79

%

 
Net interest margin (4) 

3.98

%

  

3.97

%

 
Average interest-earning assets to average interest bearing liabilities 

133

%

  

132

%

 

(1)

 Interest on certain tax exempt loans and securities is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 21%.

(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 2019

 

2nd Qtr 2019

 

1st Qtr 2019

 

4th Qtr 2018

 

3rd Qtr 2018

Summary of Operations     
Tax-equivalent interest income (1) 

$

35,922

 

 

$

35,490

 

 

$

34,166

 

 

$

33,808

 

 

$

32,220

 

Interest expense 

 

6,791

 

 

 

6,252

 

 

 

5,649

 

 

 

5,058

 

 

 

4,434

 

Tax-equivalent net interest income (1) 

 

29,131

 

 

 

29,238

 

 

 

28,517

 

 

 

28,750

 

 

 

27,786

 

Provision for loan losses 

 

1,327

 

 

 

282

 

 

 

212

 

 

 

472

 

 

 

1,376

 

Tax-equivalent NII after provision for loan losses (1) 

 

27,804

 

 

 

28,956

 

 

 

28,305

 

 

 

28,278

 

 

 

26,410

 

Investment securities gains, net of impairment 

 

11

 

 

 

-

 

 

 

-

 

 

 

97

 

 

 

76

 

Non-interest income (excluding securities gains/losses) 

 

11,831

 

 

 

10,486

 

 

 

10,813

 

 

 

8,272

 

 

 

9,846

 

Non-interest expense 

 

23,203

 

 

 

24,235

 

 

 

24,866

 

 

 

21,210

 

 

 

22,286

 

Income taxes 

 

3,033

 

 

 

2,759

 

 

 

2,523

 

 

 

3,082

 

 

 

2,483

 

Net income 

 

13,171

 

 

 

12,199

 

 

 

11,482

 

 

 

12,097

 

 

 

11,306

 

Tax equivalent adjustment (1) 

 

239

 

 

 

249

 

 

 

247

 

 

 

258

 

 

 

257

 

At Period End     
Total assets 

$

3,350,724

 

 

$

3,277,552

 

 

$

3,221,249

 

 

$

3,181,722

 

 

$

3,098,093

 

Earning assets 

 

3,045,659

 

 

 

2,980,243

 

 

 

2,934,860

 

 

 

2,898,471

 

 

 

2,810,624

 

Loans 

 

2,665,300

 

 

 

2,624,219

 

 

 

2,548,968

 

 

 

2,540,039

 

 

 

2,456,357

 

Allowance for loan losses 

 

30,250

 

 

 

28,934

 

 

 

28,164

 

 

 

28,331

 

 

 

27,639

 

Deposits 

 

2,760,615

 

 

 

2,680,637

 

 

 

2,685,792

 

 

 

2,620,882

 

 

 

2,524,431

 

Stockholders’ equity 

 

418,046

 

 

 

407,216

 

 

 

395,789

 

 

 

399,589

 

 

 

393,457

 

Stockholders’ equity / assets 

 

12.48

%

 

 

12.42

%

 

 

12.29

%

 

 

12.56

%

 

 

12.70

%

Goodwill 

 

100,069

 

 

 

98,569

 

 

 

98,569

 

 

 

98,569

 

 

 

98,569

 

Average Balances      
Total assets 

$

3,303,013

 

 

$

3,223,997

 

 

$

3,183,012

 

 

$

3,138,202

 

 

$

3,059,225

 

Earning assets 

 

2,985,498

 

 

 

2,914,587

 

 

 

2,871,340

 

 

 

2,831,866

 

 

 

2,754,561

 

Loans 

 

2,624,314

 

 

 

2,561,341

 

 

 

2,517,283

 

 

 

2,474,221

 

 

 

2,403,932

 

Deposits and interest-bearing liabilities 

 

2,843,079

 

 

 

2,781,216

 

 

 

2,742,626

 

 

 

2,705,736

 

 

 

2,633,054

 

Deposits 

 

2,718,632

 

 

 

2,678,060

 

 

 

2,642,158

 

 

 

2,594,635

 

 

 

2,513,708

 

Stockholders’ equity 

 

411,041

 

 

 

398,612

 

 

 

395,138

 

 

 

392,701

 

 

 

389,361

 

Stockholders’ equity / assets 

 

12.44

%

 

 

12.36

%

 

 

12.41

%

 

 

12.51

%

 

 

12.73

%

Per Common Share Data     
Net Income:     
Basic 

$

0.67

 

 

$

0.62

 

 

$

0.57

 

 

$

0.60

 

 

$

0.55

 

Diluted 

 

0.66

 

 

 

0.61

 

 

 

0.57

 

 

 

0.59

 

 

 

0.55

 

Dividends 

 

0.19

 

 

 

0.19

 

 

 

0.19

 

 

 

0.17

 

 

 

0.17

 

Market Value:     
High 

$

29.44

 

 

$

30.44

 

 

$

31.30

 

 

$

31.09

 

 

$

35.00

 

Low 

 

25.50

 

 

 

26.59

 

 

 

24.12

 

 

 

22.78

 

 

 

29.61

 

Close 

 

28.97

 

 

 

28.57

 

 

 

28.74

 

 

 

24.51

 

 

 

30.11

 

Common Book Value 

 

21.19

 

 

 

20.65

 

 

 

20.08

 

 

 

19.81

 

 

 

19.29

 

Shares outstanding, end of period (in thousands) 

 

19,729

 

 

 

19,723

 

 

 

19,713

 

 

 

20,171

 

 

 

20,396

 

Performance Ratios (annualized)     
Tax-equivalent net interest margin (1) 

 

3.88

%

 

 

4.03

%

 

 

4.03

%

 

 

4.02

%

 

 

4.00

%

Return on average assets 

 

1.58

%

 

 

1.52

%

 

 

1.46

%

 

 

1.53

%

 

 

1.47

%

Return on average equity 

 

12.71

%

 

 

12.28

%

 

 

11.78

%

 

 

12.22

%

 

 

11.52

%

Efficiency ratio (2) 

 

56.65

%

 

 

61.01

%

 

 

63.22

%

 

 

57.29

%

 

 

59.22

%

Effective tax rate 

 

18.72

%

 

 

18.44

%

 

 

18.01

%

 

 

20.30

%