UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM
10-Q
(Mark
One)
ý
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. For the Quarterly Period Ended
March 31,
2008
|
OR
o
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 For the Transition Period from
___________to__________
|
Commission
file number
0-26850
First Defiance Financial
Corp.
(Exact
name of registrant as specified in its charter)
Ohio
|
|
34-1803915
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
Number)
|
|
|
|
601
Clinton Street, Defiance, Ohio
|
|
43512
|
(Address
or principal executive office)
|
|
(Zip
Code)
|
Registrant's
telephone number, including area code:
(419)
782-5015
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
ý
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one)
|
Large
accelerated filer
o
|
Accelerated
filer
ý
|
|
Non-accelerated
filer
o
|
Smaller
reporting company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes
o
No
ý
APPLICABLE
ONLY TO CORPORATE ISSUERS
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practical date. Common Stock, $.01 Par Value – 8,107,453
shares outstanding at May 8, 2008.
FIRST
DEFIANCE FINANCIAL CORP.
|
|
Page
Number
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
7
|
|
|
|
|
|
24
|
|
|
|
|
|
34
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
36
|
|
|
|
|
|
37
|
|
|
|
|
|
37
|
|
|
|
|
|
37
|
|
|
|
|
|
38
|
PART
1-FINANCIAL INF
O
RMATION
Item 1. Financial Stateme
n
ts
FIRST
DEFIANCE FINANCIAL CORP.
Consolidated
Condensed Statements of Financial Condition
(UNAUDITED)
(Amounts
in Thousands)
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
|
|
(In
Thousands)
|
|
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
Cash and amounts due from
depository institutions
|
|
$
|
40,030
|
|
|
$
|
53,976
|
|
Interest-bearing
deposits
|
|
|
1,548
|
|
|
|
11,577
|
|
|
|
|
41,578
|
|
|
|
65,553
|
|
Securities:
|
|
|
|
|
|
|
|
|
Available-for-sale, carried at
fair value
|
|
|
123,566
|
|
|
|
112,370
|
|
Held-to-maturity, carried at
amortized cost
|
|
|
|
|
|
|
|
|
(fair value $1,129 and $1,161 at
March 31, 2008
|
|
|
|
|
|
|
|
|
and December 31, 2007,
respectively)
|
|
|
1,081
|
|
|
|
1,117
|
|
|
|
|
124,647
|
|
|
|
113,487
|
|
Loans
held for sale
|
|
|
7,400
|
|
|
|
5,751
|
|
Loans
receivable, net of allowance of $18,556 at March
|
|
|
|
|
|
|
|
|
31,
2007 and $13,890 at December 31, 2007, respectively
|
|
|
1,516,798
|
|
|
|
1,275,806
|
|
Accrued
interest receivable
|
|
|
8,636
|
|
|
|
6,755
|
|
Federal
Home Loan Bank stock
|
|
|
20,864
|
|
|
|
18,586
|
|
Bank
owned life insurance
|
|
|
28,696
|
|
|
|
28,423
|
|
Premises
and equipment
|
|
|
50,070
|
|
|
|
40,545
|
|
Real
estate and other assets held for sale
|
|
|
3,448
|
|
|
|
2,460
|
|
Goodwill
|
|
|
57,315
|
|
|
|
36,820
|
|
Core
deposit and other intangibles
|
|
|
9,915
|
|
|
|
3,551
|
|
Mortgage
servicing rights
|
|
|
9,074
|
|
|
|
5,973
|
|
Other
assets
|
|
|
7,606
|
|
|
|
5,694
|
|
Total
assets
|
|
$
|
1,886,047
|
|
|
$
|
1,609,404
|
|
(continued)
FIRST
DEFIANCE FINANCIAL CORP.
Consolidated
Condensed Stat
e
ments of Financial Condition
(UNAUDITED)
(Amounts
in Thousands)
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
|
|
(In
Thousands)
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,413,701
|
|
|
$
|
1,217,858
|
|
Advances from the Federal Home
Loan Bank
|
|
|
163,966
|
|
|
|
139,536
|
|
Short term
borrowings
|
|
|
20,000
|
|
|
|
−
|
|
Securities sold under repurchase
agreements
|
|
|
31,361
|
|
|
|
30,055
|
|
Subordinated
debentures
|
|
|
36,083
|
|
|
|
36,083
|
|
Advance payments by
borrowers
|
|
|
594
|
|
|
|
762
|
|
Deferred taxes
|
|
|
5,654
|
|
|
|
1,306
|
|
Other liabilities
|
|
|
19,853
|
|
|
|
17,850
|
|
Total
liabilities
|
|
|
1,691,209
|
|
|
|
1,443,450
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred stock, no par value per
share:
|
|
|
|
|
|
|
|
|
5,000 shares authorized; no
shares issued
|
|
|
−
|
|
|
|
−
|
|
Common stock, $.01 par value per
share:
|
|
|
|
|
|
|
|
|
20,000 shares authorized; 12,739
and 11,703 shares
|
|
|
|
|
|
|
|
|
issued and 8,111 and 7,059 shares
outstanding, respectively
|
|
|
127
|
|
|
|
117
|
|
Additional paid-in
capital
|
|
|
140,231
|
|
|
|
112,651
|
|
Stock acquired by
ESOP
|
|
|
−
|
|
|
|
(202
|
)
|
Accumulated other comprehensive
income (loss), net of
|
|
|
|
|
|
|
|
|
tax of ($404) and ($224),
respectively
|
|
|
(746
|
)
|
|
|
(415
|
)
|
Retained earnings
|
|
|
127,923
|
|
|
|
126,630
|
|
Treasury stock, at cost, 4,628 and
4,644 shares
respectively
|
|
|
(72,700
|
)
|
|
|
(72,827
|
)
|
Total
stockholders’ equity
|
|
|
194,835
|
|
|
|
165,954
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
1,886,047
|
|
|
$
|
1,609,404
|
|
See
accompanying notes
FIRST
DEFIANCE FINANCIAL CORP.
Consolidated
Conde
n
sed Statements of Income
(UNAUDITED)
(Amounts
in Thousands, except per share data)
|
|
Three
Months Ended
|
|
|
|
March
31
|
|
|
|
2008
|
|
|
2007
|
|
Interest
Income
|
|
|
|
|
|
|
Loans
|
|
$
|
22,812
|
|
|
$
|
22,298
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
1,149
|
|
|
|
1,128
|
|
Non-taxable
|
|
|
336
|
|
|
|
304
|
|
Interest-bearing
deposits
|
|
|
99
|
|
|
|
11
|
|
FHLB stock
dividends
|
|
|
243
|
|
|
|
292
|
|
Total
interest income
|
|
|
24,639
|
|
|
|
24,033
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
8,670
|
|
|
|
9,540
|
|
FHLB advances and
other
|
|
|
1,655
|
|
|
|
2,003
|
|
Subordinated
debentures
|
|
|
529
|
|
|
|
337
|
|
Notes payable
|
|
|
194
|
|
|
|
169
|
|
Total
interest expense
|
|
|
11,048
|
|
|
|
12,049
|
|
Net
interest income
|
|
|
13,591
|
|
|
|
11,984
|
|
Provision
for loan losses
|
|
|
1,058
|
|
|
|
457
|
|
Net
interest income after provision for loan losses
|
|
|
12,533
|
|
|
|
11,527
|
|
Non-interest
Income
|
|
|
|
|
|
|
|
|
Service fees and other
charges
|
|
|
2,623
|
|
|
|
2,518
|
|
Insurance and investment sales
commission income
|
|
|
1,936
|
|
|
|
1,703
|
|
Mortgage banking
income
|
|
|
1,114
|
|
|
|
782
|
|
Gain on sale of non-mortgage
loans
|
|
|
35
|
|
|
|
5
|
|
Gain on sale of
securities
|
|
|
(81
|
)
|
|
|
−
|
|
Trust income
|
|
|
111
|
|
|
|
86
|
|
Income from Bank Owned Life
Insurance
|
|
|
273
|
|
|
|
294
|
|
Other non-interest
income
|
|
|
4
|
|
|
|
219
|
|
Total
non-interest income
|
|
|
6,015
|
|
|
|
5,607
|
|
Non-interest
Expense
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
7,124
|
|
|
|
6,552
|
|
Occupancy
|
|
|
1,669
|
|
|
|
1,403
|
|
State franchise
tax
|
|
|
494
|
|
|
|
363
|
|
Data processing
|
|
|
1,029
|
|
|
|
953
|
|
Acquisition related
charges
|
|
|
750
|
|
|
|
−
|
|
Amortization of
intangibles
|
|
|
191
|
|
|
|
143
|
|
Other non-interest
expense
|
|
|
2,219
|
|
|
|
2,357
|
|
Total
non-interest expense
|
|
|
13,476
|
|
|
|
11,771
|
|
Income
before income taxes
|
|
|
5,072
|
|
|
|
5,363
|
|
Federal
income taxes
|
|
|
1,653
|
|
|
|
1,757
|
|
Net
Income
|
|
|
3,419
|
|
|
|
3,606
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share (Note 7)
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.48
|
|
|
$
|
0.51
|
|
Diluted
|
|
$
|
0.47
|
|
|
$
|
0.50
|
|
Dividends
declared per share (Note 6)
|
|
$
|
0.26
|
|
|
$
|
0.25
|
|
Average
shares outstanding (Note 7)
|
|
|
|
|
|
|
|
|
Basic
|
|
|
7,195
|
|
|
|
7,119
|
|
Diluted
|
|
|
7,241
|
|
|
|
7,229
|
|
FIRST
DEFIANCE FINANCIAL CORP.
Consolidated
Condensed Statement of
Changes in Stockholders’
Equity
(UNAUDITED)
(Amounts
in Thousands)
|
|
Three
Months Ended
|
|
|
|
March
31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$
|
165,954
|
|
|
$
|
159,825
|
|
Adjustment
to initially apply FIN 48
|
|
|
−
|
|
|
|
(200
|
)
|
Balance
at beginning of period as adjusted
|
|
|
165,954
|
|
|
|
159,625
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,419
|
|
|
|
3,606
|
|
Other comprehensive income
(loss)
|
|
|
(331
|
)
|
|
|
97
|
|
Total
comprehensive income
|
|
|
3,088
|
|
|
|
3,703
|
|
ESOP
shares released
|
|
|
551
|
|
|
|
701
|
|
Stock
option expense
|
|
|
54
|
|
|
|
59
|
|
Tax
benefit of employee plans
|
|
|
55
|
|
|
|
44
|
|
Shares
issued under stock option plans
|
|
|
555
|
|
|
|
272
|
|
Treasury
shares repurchased
|
|
|
(462
|
)
|
|
|
(326
|
)
|
Acquisition
of Huber, Harger, Welt and Smith
|
|
|
−
|
|
|
|
2,250
|
|
Acquisition
of Pavilion Bancorp
|
|
|
27,139
|
|
|
|
−
|
|
Common
cash dividends declared (Note 6)
|
|
|
(2,101
|
)
|
|
|
(1,788
|
)
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
|
$
|
194,835
|
|
|
$
|
164,540
|
|
See
Accompanying Notes
FIRST
DEFIANCE FINANCIAL CORP.
Consolidated
Condensed Statements of Cash Flows
(Amounts
in Thousands)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
Operating
Activities
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
$
|
2,360
|
|
|
$
|
6,399
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
Proceeds
from maturities of held-to-maturity securities
|
|
|
36
|
|
|
|
66
|
|
Proceeds
from maturities of available-for-sale securities
|
|
|
8,394
|
|
|
|
5,272
|
|
Proceeds
from sale of real estate and other assets held for sale
|
|
|
235
|
|
|
|
466
|
|
Net
cash received in acquisition of Huber, Harger, Welt and
Smith
|
|
|
−
|
|
|
|
188
|
|
Net
cash paid for in acquisition of Pavilion Bancorp, Inc.
|
|
|
(23,585
|
)
|
|
|
−
|
|
Proceeds
from sale of non-mortgage loans
|
|
|
2,750
|
|
|
|
251
|
|
Purchases
of available-for-sale securities
|
|
|
(11,024
|
)
|
|
|
(3,693
|
)
|
Investment
in bank owned life insurance
|
|
|
−
|
|
|
|
(2,060
|
)
|
Purchases
of office properties and equipment
|
|
|
(1,628
|
)
|
|
|
(852
|
)
|
Net
(increase) decrease in loans receivable
|
|
|
(13,720
|
)
|
|
|
1,670
|
|
Net
cash (used in) provided by investing activities
|
|
|
(38,542
|
)
|
|
|
1,308
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in deposits and advance payments by
borrowers
|
|
|
(13,453
|
)
|
|
|
7,630
|
|
Repayment
of Federal Home Loan Bank long-term advances
|
|
|
(222
|
)
|
|
|
(217
|
)
|
Net
decrease in Federal Home Loan Bank short-term advances
|
|
|
(500
|
)
|
|
|
(33,100
|
)
|
Proceeds
from issuance of subordinated debentures
|
|
|
−
|
|
|
|
15,464
|
|
Proceeds
from Federal Home Loan Bank long-term advances
|
|
|
19,000
|
|
|
|
−
|
|
Decrease
in securities sold under repurchase agreements
|
|
|
(940
|
)
|
|
|
(6,974
|
)
|
Net
increase in short-term borrowings
|
|
|
10,000
|
|
|
|
−
|
|
Purchase
of common stock for treasury
|
|
|
(462
|
)
|
|
|
(326
|
)
|
Cash
dividends paid
|
|
|
(1,826
|
)
|
|
|
(1,767
|
)
|
Proceeds
from exercise of stock options
|
|
|
555
|
|
|
|
272
|
|
Excess
tax benefits from exercise of stock options
|
|
|
55
|
|
|
|
44
|
|
Net
cash provided by (used in) financing activities
|
|
|
12,207
|
|
|
|
(18,974
|
)
|
Increase
(decrease) in cash and cash equivalents
|
|
|
(23,975
|
)
|
|
|
(11,267
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
65,553
|
|
|
|
50,023
|
|
Cash
and cash equivalents at end of period
|
|
$
|
41,578
|
|
|
$
|
38,756
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
10,817
|
|
|
$
|
11,900
|
|
Income
taxes paid
|
|
$
|
1,230
|
|
|
$
|
−
|
|
Transfers
from loans to other real estate owned and other
|
|
|
|
|
|
|
|
|
assets held for
sale
|
|
$
|
19
|
|
|
$
|
655
|
|
See
accompanying notes.
FIRST
DEFIANCE FINANCIAL CORP.
Notes to
Consolidated Condensed Financial Statements
(Unaudited
at March 31, 2
0
08 and 2007)
1. Principles
of Consolidation
The
consolidated condensed financial statements include the accounts of First
Defiance Financial Corp. ("First Defiance" or "the Company"), its two wholly
owned subsidiaries, First Federal Bank of the Midwest ("First Federal") and
First Insurance and Investments, Inc. (“First Insurance”). In the opinion of
management, all significant inter-company accounts and transactions have been
eliminated in consolidation.
2
.
Basis of
Presentation
The
consolidated condensed statement of financial condition at December 31, 2007 has
been derived from the audited financial statements at that date, which were
included in First Defiance’s Annual Report on Form 10-K.
The
accompanying consolidated condensed financial statements as of March 31, 2008
and for the three month period ended March 31, 2008 and 2007 have been prepared
by First Defiance without audit and do not include information or footnotes
necessary for the complete presentation of financial condition, results of
operations, and cash flows in conformity with accounting principles generally
accepted in the United States. These consolidated condensed financial statements
should be read in conjunction with the financial statements and notes thereto
included in First Defiance's 2007 Annual Report on Form 10-K for the year ended
December 31, 2007. However, in the opinion of management, all adjustments,
consisting of only normal recurring items, necessary for the fair presentation
of the financial statements have been made. The results for the three month
period ended March 31, 2008 are not necessarily indicative of the results that
may be expected for the entire year.
Goodwill
Goodwill
is the excess of the purchase price over the fair value of the assets and
liabilities of companies acquired through business combinations accounted for
under the purchase method. Goodwill is evaluated at the business unit level,
which for First Defiance are First Federal and First Insurance. At March 31,
2008 goodwill totaled $57.3 million, an increase of $20.5 million from the $36.8
million balance reported at December 31, 2007. The increase in goodwill is the
result of the Pavilion Bancorp, Inc (“Pavilion”) acquisition, which closed on
March 14, 2008. The acquisition of Huber, Harger, Welt and Smith (“HHWS”) added
$1.7 million of goodwill in 2007.
Income
Taxes
The
Company’s effective tax rate differs from the statutory 35% federal tax rate
primarily because of the existence of municipal securities and bank owned life
insurance, the earnings of
2
.
Basis of Presentation
(continued)
which are
exempt from federal income taxes, partially offset by the excess of fair value
over cost of allocated ESOP shares and stock option expense related to incentive
option grants which are not deductible for Federal income taxes.
Stock
Compensation
The
Company accounts for stock-based awards in accordance with Statement of
Financial Accounting Standard (“SFAS”) 123(R)
Share-Based Payment
, which
requires measurement of compensation cost for all stock-based awards be based on
the grant-date fair value and recognition of compensation cost over the service
period of stock-based awards, which is usually the same as the vesting period.
The fair value of stock options and stock grants is determined using the
Black-Scholes valuation model. SFAS 123(R) provides for expense recognition, for
both new and existing stock-based awards, as the required services are
rendered.
The
Securities and Exchange Commission (“SEC”) has published Staff Accounting
Bulletin No. 107 (“SAB 107”), which expressed the views of the Staff regarding
the interaction between SFAS No. 123(R) and certain SEC rules and regulations
and provided the Staff’s views regarding the valuation of stock-based payment
arrangements for public companies. SAB 107 requires that stock-based
compensation be classified in the same expense category as cash compensation.
Accordingly, the Company has included stock-based compensation and benefits in
the condensed consolidated statements of income as part of compensation and
benefits.
Segment
Information
Management
considers the following factors in determining the need to disclose separate
operating segments: 1) The nature of products and services, which are all
financial in nature. 2) The type and class of customer for the products and
services; in First Defiance’s case retail customers for retail bank and
insurance products and commercial customers for commercial loan, deposit, life,
health and property and casualty insurance needs. 3) The methods used to
distribute products or provide services; such services are delivered through
banking and insurance offices and through bank and insurance customer contact
representatives. Retail and commercial customers are frequently targets for both
banking and insurance products. 4) The nature of the regulatory environment;
both banking and insurance entities are subject to various regulatory bodies and
a number of specific regulations.
Quantitative
thresholds of SFAS 131,
Disclosures about Segments of an
Enterprise and Related Information
are evaluated on an annual basis and
First Insurance has not met any of those thresholds. Accordingly, all of the
financial services operations are considered by management to be aggregated in
one reportable segment.
2
.
Basis of Presentation
(continued)
New
Accounting Standards
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 157 (“SFAS 157”),
Fair Value Measurements
. This
Statement defines fair value, establishes a framework for measuring fair value
and expands disclosures about fair value measurements. This Statement
establishes a fair value hierarchy about the assumptions used to measure fair
value and clarifies assumptions about risk and the effect of a restriction on
the sale or use of an asset. This standard is effective for fiscal years
beginning after November 15, 2007. In February 2008, the FASB issued Staff
Position (“FSP”) 157-2, Effective Date of FASB Statement No. 157. This FSP
delays the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value on a recurring basis (at least annually) to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. The Company
adopted SFAS 157 as of January 1, 2008 and was not material.
In
February 2007, the FASB issued Statement No. 159,
The Fair Value Option for Financial
Assets and Financial Liabilities
. The Statement provides companies with
an option to report selected financial assets and liabilities at fair value and
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. The Company did not elect the fair
value option for any financial assets or financial liabilities as of January 1,
2008, the effective date of the Statement.
In
November 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 109,
Written Loan
Commitments Recorded at Fair Value Through Earnings
(SAB 109). SAB 109
supercedes SAB 105,
Application of Accounting Principles
to Loan Commitments
, and indicates that the expected net future cash
flows related to the associated servicing of the loan should be included in the
measurement of all written loan commitments that are accounted for at fair value
through earnings. SAB 109 became effective beginning January 1, 2008 and did not
have a material effect on the Company’s financial position, results of
operations or cash flows.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued Statement No. 141R,
Business Combinations (Revised
2007).
Statement No. 141R replaces Statement No. 141,
Business Combinations,
and
applies to all transactions and other events in which one entity obtains control
over one or more other businesses. Statement No. 141R requires an acquirer, upon
initially obtaining control of another entity, to recognize the assets,
liabilities and any non-controlling interest in the acquiree at fair value as of
the acquisition date. Contingent consideration is required to be recognized and
measured at fair value on the date of acquisition rather than at a later date
when the amount of that consideration may be determinable beyond a reasonable
doubt. This fair value approach replaces the cost-allocation process required
under Statement No. 141 whereby the cost of an acquisition was allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
value. Statement No. 141R requires acquirers to expense acquisition related
costs as incurred rather than allocating such costs to the assets acquired and
liabilities assumed, as was previously the case under Statement No.
141.
2
.
Basis of Presentation
(continued)
Under
Statement 141R, the requirements of Statement 146,
Accounting for Costs Associated with
Exit or Disposal Activities
, would have to be met in order to accrue for
a restructuring plan in purchase accounting. Pre-acquisition contingencies are
to be recognized at fair value, unless it is a non-contractual contingency that
is not likely to materialize, in which case, nothing should be recognized in
purchase accounting and instead, that contingency would be subject to the
probable and estimable recognition criteria of Statement No. 5,
Accounting for
Contingencies
.
This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.
In March
2008, the FASB issued SFAS 161,
Disclosures About Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement No.
133.
SFAS 161 amends SFAS 133,
Accounting for Derivative
Instruments and Hedging Activities,
by amending and expanding the
disclosure requirements of SFAS 133 to provide greater transparency about i) how
and why an entity uses derivative instruments, ii) how derivative instruments
and related hedge items are accounted for under SFAS 133 and its related
interpretations, and iii) how derivative instruments and related hedged items
affect an entity’s financial position, results of operations and cash flows. To
meet those objectives, SFAS 161 requires qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of gains and losses on derivative instruments and disclosures
about credit-risk-related contingent features in derivative agreements. SFAS 161
is effective for the Company on January 1, 2009 and is not expected to have a
significant impact on the Company’s financial position, results of operations or
cash flows.
3.
Fair Value
SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants. A
fair value measurement assumes that the transaction to sell the asset or
transfer the liability occurs in the principal market for the asset or liability
or, in the absence of a principal market, the most advantageous market for the
asset or liability. The price in the principal (or most advantageous) market
used to measure the fair value of the asset or liability shall not be adjusted
for transaction costs. An orderly transaction is a transaction that assumes
exposure to the market for a period prior to the measurement date to allow for
marketing activities that are usual and customary for transactions involving
such assets and liabilities; it is not a forced transaction. Market participants
are buyers and sellers in the principal market that are (i) independent, (ii)
knowledgeable, (iii) able to transact and (iv) willing to transact.
3.
Fair Value (continued)
SFAS 157
requires the use of valuation techniques that are consistent with the market
approach, the income approach and/or the cost approach. The market approach uses
prices and other relevant information generated by market transactions involving
identical or comparable assets and liabilities. The income approach uses
valuation techniques to convert future amounts, such as cash flows or earnings,
to a single present amount on a discounted basis. The cost approach is based on
the amount that currently would be required to replace the service capacity of
an asset (replacement cost). Valuation techniques should be consistently
applied. Inputs to valuation techniques refer to the assumptions that market
participants would use in pricing the asset or liability. Inputs may be
observable, meaning those that reflect the assumptions market participants would
use in pricing the asset or liability developed based on the best information
available. In that regard, SFAS 157 established a fair value hierarchy for
valuation inputs that gives the highest priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as follows:
|
Ÿ
|
Level 1
: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that
the reporting entity has the ability to access at the measurement
date.
|
|
Ÿ
|
Level 2
: Inputs other
than quoted prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly. These might include quoted
prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not
active, inputs other that quoted prices that are observable for the asset
or liability (such as interest rates, prepayment speeds, credit risks,
etc.) or inputs that are derived principally from or corroborated by
market data by a correlation or other
means.
|
|
Ÿ
|
Level 3
: Unobservable
inputs for determining fair value of assets and liabilities that reflect
an entity’s own assumptions about the assumptions that market participants
would use in pricing the assets or
liabilities.
|
A
description of the valuation methodologies used for instruments measured at fair
value, as well as the general classification of such instruments pursuant to the
valuation hierarchy, is set forth below.
Available for sale
securities
. Securities classified as available for sale are reported at
fair value utilizing Level 2 inputs. For these securities, the Company obtains
fair value measurements from an independent pricing service. The fair value
measurements consider observable data that may include dealer quotes, market
spreads, cash flows and the bond’s terms and conditions, among other
things.
Impaired loans
. Impaired
loans are reported at the fair value of the underlying collateral, if repayment
is expected solely from collateral. Impaired loans that are not collateral
dependent are reported at the present value of anticipated cash flows. Impaired
loans are valued using Level 3 inputs.
3.
Fair Value (continued)
Mortgage servicing rights
.
Mortgage servicing rights are reported at fair value utilizing Level 3 inputs.
MSRs are valued by a third party consultant using a proprietary cash flow
valuation model.
The
following table summarizes the financial assets measured at fair value on a
recurring and non-recurring basis as of March 31, 2008, segregated by the level
of the valuation inputs within the fair value hierarchy utilized to measure fair
value:
Assets and Liabilities
Measured on a Recurring Basis
|
|
Level
1 Inputs
|
|
|
Level
2 Inputs
|
|
|
Level
3 Inputs
|
|
|
Total
Fair
Value
|
|
|
|
(In
Thousands)
|
|
Available
for sale securities
|
|
$
|
-
|
|
|
$
|
123,566
|
|
|
$
|
-
|
|
|
$
|
123,566
|
|
Assets and Liabilities
Measured on a Non-Recurring Basis
|
|
Level
1 Inputs
|
|
|
Level
2 Inputs
|
|
|
Level
3 Inputs
|
|
|
Total
Fair
Value
|
|
|
|
(In
Thousands)
|
|
Impaired
loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,459
|
|
|
$
|
5,459
|
|
Mortgage
servicing rights
|
|
|
-
|
|
|
|
-
|
|
|
|
3,373
|
|
|
|
3,373
|
|
Mortgage
servicing rights are carried at lower of cost or fair value by risk
tranches. Tranches where the fair value is less than the cost had a market value
of $3,373,000 and a valuation allowance of $259,000. A charge of $143,000
was included in earnings for the period.
Impaired
loans, which are measured for impairment using the fair value of the collateral
for collateral dependent loans, had a carrying amount of $5,459,000, with a
valuation allowance of $2,850,000.
4.
Stock Compensation Plans
First
Defiance has established incentive stock option plans for its directors and
employees and has reserved 1,727,485 shares of common stock for issuance under
the plans. As of March 31, 2008, 374,751 options (368,751 for employees and
6,000 for directors) have been granted and remain outstanding at option prices
based on the market value of the underlying shares on the date the options were
granted.
The
Company can issue incentive stock options and nonqualified stock options under
their incentive stock plans. Generally, one-fifth of the options awarded become
exercisable on each of the first five anniversaries of the date of grant. The
option period expires ten years from the date of grant and the exercise price is
the market price at the date of grant.
4. Stock
Compensation Plans (continued)
Following
is activity under the plans:
|
|
Three
months ended March 31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Options
Outstanding
|
|
|
Weighted
Average
Option
Prices
|
|
|
Options
Outstanding
|
|
|
Weighted
Average
Option
Prices
|
|
Options
outstanding, beginning of period
|
|
|
418,339
|
|
|
$
|
20.79
|
|
|
|
404,154
|
|
|
$
|
19.36
|
|
Forfeited
or cancelled
|
|
|
(6,102
|
)
|
|
|
26.19
|
|
|
|
(50
|
)
|
|
|
25.89
|
|
Exercised
|
|
|
(37,486
|
)
|
|
|
14.82
|
|
|
|
(19,422
|
)
|
|
|
14.01
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options
outstanding, end of period
|
|
|
374,751
|
|
|
$
|
21.30
|
|
|
|
384,682
|
|
|
$
|
19.63
|
|
Vested
or expected to vest at
period
end
|
|
|
358,675
|
|
$
|
21.04
|
|
|
|
|
|
|
|
|
|
Exercisable
at period end
|
|
|
230,451
|
|
$
|
18.13
|
|
|
|
|
|
|
|
|
|
Proceeds,
related tax benefits realized from options exercised and intrinsic value of
options exercised were as follows:
|
|
Three
Months Ended March 31
|
|
|
|
2008
|
|
|
2007
|
|
Cash
received from option exercises
|
|
$
|
555,355
|
|
|
$
|
272,146
|
|
Tax
benefit realized from option exercises
|
|
|
54,589
|
|
|
|
43,774
|
|
Intrinsic
value of options exercised
|
|
|
216,407
|
|
|
|
291,253
|
|
As of
March 31, 2008, there was $579,000 of total unrecognized compensation costs
related to nonvested stock options granted under the Company Stock Option Plans.
The cost is expected to be recognized over a weighted-average period of 3.0
years.
As of
March 31, 2008 there were 229,920 shares available for grant under the Company’s
stock option plans.
There
were no options granted to employees or directors during the three month periods
ended March 31, 2008 or 2007.
5.
Acquisitions
On March
14, 2008, First Defiance completed the acquisition of Pavilion, which is
headquartered in Adrian, Michigan. Each Pavilion shareholder received 1.4209
shares of First Defiance common stock and $37.50 in cash for each share of
Pavilion stock. In connection with this transaction, 1,039,861 shares of First
Defiance common stock were issued at a value of $27.1 million. The common shares
issued were valued at $26.117 per share representing the average of the closing
bid and ask price as of the date of announcement plus two days prior and two
days subsequent to the announcement. The total cost of the transaction,
including legal and investment banking fees, was $55.5 million. The assets and
liabilities of Pavilion were recorded on the balance sheet at their fair value
as of the acquisition date. The results of Pavilion’s operations have been
included in the First Defiance’s consolidated statement of income from the date
of acquisition.
5.
Acquisitions
(continued)
The
following tables summarize the estimated fair values of the net assets acquired
and the computation of the purchase price and goodwill related to the Pavilion
acquisition.
|
|
March
14, 2008
|
|
|
|
(In
Thousands)
|
|
Assets
|
|
|
|
Cash
and cash equivalents
|
|
$
|
4,815
|
|
Investment
securities
|
|
|
9,145
|
|
Loans,
net of allowance for loan losses
|
|
|
231,156
|
|
Premises
and equipment
|
|
|
8,744
|
|
Federal
Home Loan Bank stock
|
|
|
2,036
|
|
Goodwill
and other intangibles
|
|
|
27,050
|
|
Other
assets
|
|
|
6,836
|
|
Total
Assets
|
|
|
289,782
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Deposits
|
|
|
209,047
|
|
Borrowings
|
|
|
18,403
|
|
Other
liabilities
|
|
|
6,793
|
|
Total
Liabilities
|
|
|
234,243
|
|
|
|
|
|
|
Net
assets acquired
|
|
$
|
55,539
|
|
|
|
|
|
|
|
|
March
14, 2008
|
|
|
|
(In
Thousands)
|
|
|
|
|
|
Purchase
price
|
|
$
|
55,539
|
|
Pavilion’s
carrying value of net assets acquired
|
|
|
(27,714
|
)
|
Excess
purchase price over Pavilion’s carrying
|
|
|
|
|
Value
of net assets acquired
|
|
|
27,825
|
|
|
|
|
|
|
Purchase
accounting adjustments
|
|
|
|
|
Portfolio
loans
|
|
|
(5,289
|
)
|
Premises
and equipment
|
|
|
827
|
|
Mortgage
servicing rights
|
|
|
(1,010
|
)
|
Deposits
|
|
|
752
|
|
Deferred
tax liabilities
|
|
|
3,945
|
|
Total
net tangible assets
|
|
|
(775
|
)
|
|
|
|
|
|
Core
deposit and other intangibles
|
|
|
(6,555
|
)
|
|
|
|
|
|
Goodwill
|
|
$
|
20,495
|
|
|
|
|
|
|
The
estimated fair values of Pavilion’s acquired assets and liabilities, including
identifiable intangible assets, are preliminary and subject to refinement, as
additional information becomes available. Any subsequent adjustments to the fair
value of assets and liabilities acquired, identifiable intangible assets, or
other purchase accounting adjustments will result in adjustments to
goodwill.
5.
Acquisitions
(continued)
During
the three months ended March 31, 2008, First Defiance recognized $750,000 of
acquisition related charges, of which, $403,000 related to retention bonuses and
severance payments to certain employees not covered by a severance plan provided
to Pavilion employees during the first quarter of 2008. The remaining $347,000
includes items related to termination of certain contracts, professional
services, start-up costs of system conversions, supplies and other non-recurring
costs associated with the completion of the acquisition and the transition of
operations. Management estimates that the balance of acquisition related costs,
most of which will be incurred in the 2008 second quarter, will be between $1.0
million and $1.25 million.
On
February 28, 2007, First Defiance acquired HHWS, an insurance agency
headquartered in Bowling Green, Ohio for a purchase price comprised of 76,435
shares of First Defiance common stock and future consideration to be paid in
cash in 2009 and 2010. As of December 31, 2007, management has reported goodwill
of $1.7 million and identifiable intangible assets of $800,000 consisting of
customer relationship intangible of $620,000 and a non-compete intangible of
$180,000.
6.
Dividends on Common Stock
As of
March 31, 2008, First Defiance had declared a quarterly cash dividend of $.26
per share for the first quarter of 2008, payable on April 25, 2008.
7.
Earnings Per Share
Basic
earnings per share as disclosed under SFAS No. 128 has been calculated by
dividing net income by the weighted average number of shares of common stock
outstanding for the three month periods ended March 31, 2008 and 2007. First
Defiance accounts for the shares issued to its Employee Stock Ownership Plan
("ESOP") in accordance with Statement of Position 93-6 of the American Institute
of Certified Public Accountants ("AICPA"). As a result, shares controlled by the
ESOP are not considered in the weighted average number of shares of common stock
outstanding until the shares are committed for allocation to an employee's
individual account. In the calculation of diluted earnings per share for the
three month periods ended March 31, 2008 and 2007, the effect of shares issuable
under stock option plans and unvested shares under the Management Recognition
Plan have been accounted for using the Treasury Stock method.
The
following table sets forth the computation of basic and diluted earnings per
share (in thousands except per share data):
|
|
Three
months ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Numerator
for basic and diluted earnings per share – Net income
|
|
$
|
3,419
|
|
|
$
|
3,606
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic EPS –
weighted average shares
|
|
|
7,195
|
|
|
|
7,119
|
|
Effect of employee stock
options
|
|
|
46
|
|
|
|
110
|
|
Denominator for diluted
EPS
|
|
|
7,241
|
|
|
|
7,229
|
|
Basic
earnings per share from net income
|
|
$
|
0.48
|
|
|
$
|
0.51
|
|
Diluted
EPS from net income
|
|
$
|
0.47
|
|
|
$
|
0.50
|
|
8. Investment
Securities
The
following is a summary of available-for-sale and held-to-maturity securities (in
thousands):
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
At
March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and
obligations
of U.S. Government
corporations and
agencies
|
|
$
|
27,164
|
|
|
$
|
485
|
|
|
$
|
-
|
|
|
$
|
27,649
|
|
Mortgage-backed
securities
|
|
|
31,721
|
|
|
|
579
|
|
|
|
(23
|
)
|
|
|
32,277
|
|
REMICs
|
|
|
3,064
|
|
|
|
71
|
|
|
|
-
|
|
|
|
3,135
|
|
Collateralized mortgage
obligations
|
|
|
20,393
|
|
|
|
420
|
|
|
|
(50
|
)
|
|
|
20,763
|
|
Trust preferred
stock
|
|
|
11,156
|
|
|
|
-
|
|
|
|
(2,240
|
)
|
|
|
8,916
|
|
Obligations of state and political
subdivisions
|
|
|
30,016
|
|
|
|
839
|
|
|
|
(29
|
)
|
|
|
30,826
|
|
Totals
|
|
$
|
123,514
|
|
|
$
|
2,394
|
|
|
$
|
(2,342
|
)
|
|
$
|
123,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
certificates
|
|
$
|
191
|
|
|
$
|
8
|
|
|
$
|
-
|
|
|
$
|
199
|
|
FNMA certificates
|
|
|
445
|
|
|
|
3
|
|
|
|
-
|
|
|
|
448
|
|
GNMA certificates
|
|
|
145
|
|
|
|
2
|
|
|
|
-
|
|
|
|
148
|
|
Obligations of state and
political subdivisions
|
|
|
300
|
|
|
|
35
|
|
|
|
-
|
|
|
|
335
|
|
Totals
|
|
$
|
1,081
|
|
|
$
|
48
|
|
|
$
|
-
|
|
|
$
|
1,129
|
|
At
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and
obligations
of U.S. Government
corporations and
agencies
|
|
$
|
24,565
|
|
|
$
|
354
|
|
|
$
|
(1
|
)
|
|
$
|
24,918
|
|
Mortgage-backed
securities
|
|
|
26,453
|
|
|
|
289
|
|
|
|
(55
|
)
|
|
|
26,687
|
|
REMICs
|
|
|
3,064
|
|
|
|
41
|
|
|
|
-
|
|
|
|
3,105
|
|
Collateralized mortgage
obligations
|
|
|
20,103
|
|
|
|
173
|
|
|
|
(77
|
)
|
|
|
20,199
|
|
Trust preferred
stock
|
|
|
9,374
|
|
|
|
29
|
|
|
|
(761
|
)
|
|
|
8,642
|
|
Obligations of state and
political subdivisions
|
|
|
28,251
|
|
|
|
568
|
|
|
|
-
|
|
|
|
28,819
|
|
Totals
|
|
$
|
111,810
|
|
|
$
|
1,454
|
|
|
$
|
(894
|
)
|
|
$
|
112,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
certificates
|
|
$
|
195
|
|
|
$
|
6
|
|
|
$
|
-
|
|
|
$
|
201
|
|
FNMA certificates
|
|
|
472
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
475
|
|
GNMA certificates
|
|
|
150
|
|
|
|
2
|
|
|
|
-
|
|
|
|
152
|
|
Obligations of state and
political
subdivisions
|
|
|
300
|
|
|
|
33
|
|
|
|
-
|
|
|
|
333
|
|
Totals
|
|
$
|
1,117
|
|
|
$
|
45
|
|
|
$
|
(1
|
)
|
|
$
|
1,161
|
|
8.
Investment Securities (continued)
The
following table summarizes First Defiance’s securities that were in an
unrealized loss position at March 31, 2008:
|
|
Duration
of Unrealized Loss Position
|
|
|
|
|
|
|
Less
than 12 Months
|
|
|
12
Month or Longer
|
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In
Thousands)
|
|
At
March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
treasury securities and obligations of U.S. government
corporations
and agencies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mortgage-backed
securities
|
|
|
2,928
|
|
|
|
(22
|
)
|
|
|
1,687
|
|
|
|
(1
|
)
|
|
|
4,615
|
|
|
|
(23
|
)
|
Collateralized
mortgage obligations and REMICs
|
|
|
929
|
|
|
|
(48
|
)
|
|
|
452
|
|
|
|
(2
|
)
|
|
|
1,381
|
|
|
|
(50
|
)
|
Trust
preferred stock
|
|
|
6,619
|
|
|
|
(1,353
|
)
|
|
|
966
|
|
|
|
(887
|
)
|
|
|
7,585
|
|
|
|
(2,240
|
)
|
Obligations
of state and political subdivisions
|
|
|
2,634
|
|
|
|
(28
|
)
|
|
|
173
|
|
|
|
(1
|
)
|
|
|
2,807
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
to maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities
|
|
|
140
|
|
|
|
-
|
|
|
|
74
|
|
|
|
-
|
|
|
|
214
|
|
|
|
-
|
|
Total
temporarily
impaired
securities
|
|
$
|
13,250
|
|
|
$
|
(1,451
|
)
|
|
$
|
3,352
|
|
|
$
|
(891
|
)
|
|
$
|
16,602
|
|
|
$
|
(2,342
|
)
|
First
Defiance does not believe the unrealized losses on securities as of March 31,
2008 represent other-than-temporary impairment. The unrealized losses are
primarily the result of the changes in interest rates, or in the case of the
trust preferred securities, a lack of liquidity in the trading of this type of
investment. Management does not believe these factors will prohibit the Company
from receiving its contractual principal and interest payments. First Defiance
has the ability and intent to hold these securities for a period necessary for
fair value to recover to the amortized cost.
9.
Loans
Loans
receivable consist of the following (in thousands):
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
Real
Estate:
|
|
|
|
|
|
|
One-to-four family
residential
|
|
$
|
265,413
|
|
|
$
|
231,921
|
|
Construction
|
|
|
17,328
|
|
|
|
13,146
|
|
Non-residential and
multi-family
|
|
|
733,476
|
|
|
|
601,851
|
|
|
|
|
1,016,217
|
|
|
|
846,918
|
|
Other
Loans:
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
332,772
|
|
|
|
283,072
|
|
Consumer finance
|
|
|
41,209
|
|
|
|
37,743
|
|
Home equity and
improvement
|
|
|
151,563
|
|
|
|
128,080
|
|
|
|
|
525,544
|
|
|
|
448,895
|
|
Total
real estate and other loans
|
|
|
1,541,761
|
|
|
|
1,295,813
|
|
Deduct:
|
|
|
|
|
|
|
|
|
Loans in process
|
|
|
5,363
|
|
|
|
5,085
|
|
Net deferred loan origination
fees and costs
|
|
|
1,044
|
|
|
|
1,032
|
|
Allowance for loan
loss
|
|
|
18,556
|
|
|
|
13,890
|
|
Totals
|
|
$
|
1,516,798
|
|
|
$
|
1,275,806
|
|
On March
14, 2008, $170.8 million of commercial loans, $29.3 million of consumer loans,
$30.0 million of mortgage loans and $1.1 million of credit card receivables were
acquired in conjunction with the Pavilion acquisition.
Changes
in the allowance for loan losses were as follows (in $000s):
|
|
Three
Months ended
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
Balance
at beginning of period
|
|
$
|
13,890
|
|
|
$
|
13,579
|
|
Provision
for loan losses
|
|
|
1,058
|
|
|
|
457
|
|
Reserve
acquired from Pavilion
|
|
|
4,099
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
One-to-four family residential
real estate
|
|
|
57
|
|
|
|
85
|
|
Non-residential and multi-family
real estate
|
|
|
464
|
|
|
|
146
|
|
Commercial
|
|
|
-
|
|
|
|
81
|
|
Home equity and
improvement
|
|
|
72
|
|
|
|
-
|
|
Consumer finance
|
|
|
27
|
|
|
|
71
|
|
Total
charge-offs
|
|
|
620
|
|
|
|
383
|
|
Recoveries
|
|
|
129
|
|
|
|
99
|
|
Net
charge-offs
|
|
|
491
|
|
|
|
284
|
|
Ending
allowance
|
|
$
|
18,556
|
|
|
$
|
13,752
|
|
9.
Loans (continued)
The
following table presents the aggregate amounts of non-performing assets,
comprised of non-accrual loans and real estate owned on the dates
indicated:
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
|
|
(in
thousands)
|
|
Non-accrual
loans
|
|
$
|
14,275
|
|
|
$
|
9,217
|
|
Loans
over 90 days past due and still accruing
|
|
|
-
|
|
|
|
-
|
|
Total
non-performing loans
|
|
|
14,275
|
|
|
$
|
9,217
|
|
Real
estate owned (REO)
|
|
|
3,448
|
|
|
|
2,460
|
|
Total
non-performing assets
|
|
$
|
17,723
|
|
|
$
|
11,677
|
|
10. Deposits
A summary
of deposit balances is as follows (in thousands):
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
Non-interest-bearing
checking accounts
|
|
$
|
168,049
|
|
|
$
|
121,563
|
|
Interest-bearing
checking and money market accounts
|
|
|
408,979
|
|
|
|
342,367
|
|
Savings
accounts
|
|
|
144,184
|
|
|
|
105,873
|
|
Retail
certificates of deposit less than $100,000
|
|
|
529,990
|
|
|
|
509,720
|
|
Retail
certificates of deposit greater than $100,000
|
|
|
162,400
|
|
|
|
137,927
|
|
Brokered
or national certificates of deposit
|
|
|
99
|
|
|
|
408
|
|
|
|
$
|
1,413,701
|
|
|
$
|
1,217,858
|
|
On March
14, 2008, $45.6 million of non-interest-bearing checking accounts, $39.7 million
of interest-bearing checking accounts, $26.2 million of savings accounts and
$97.5 million of certificates of deposit were acquired as part of the Pavilion
acquisition.
11.
Borrowings
First
Defiance’s debt, Federal Home Loan Bank (FHLB) advances and junior subordinated
debentures owed to unconsolidated subsidiary trusts are comprised of the
following:
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
|
|
(in
thousands)
|
|
FHLB
Advances:
|
|
|
|
|
|
|
Overnight
borrowings
|
|
$
|
10,800
|
|
|
$
|
11,300
|
|
Single
maturity fixed rate advances
|
|
|
10,000
|
|
|
|
10,000
|
|
Single
maturity LIBOR based advances
|
|
|
45,000
|
|
|
|
45,000
|
|
Putable
advances
|
|
|
64,000
|
|
|
|
45,000
|
|
Strike-rate
advances
|
|
|
27,000
|
|
|
|
27,000
|
|
Variable
rate advances
|
|
|
4,500
|
|
|
|
-
|
|
Amortizable
mortgage advances
|
|
|
2,666
|
|
|
|
1,236
|
|
Total
|
|
$
|
163,966
|
|
|
$
|
139,536
|
|
Borrowings
on Bank Line of Credit
|
|
$
|
20,000
|
|
|
$
|
-
|
|
Junior
subordinated debentures owed to
unconsolidated
subsidiary trusts
|
|
$
|
36,083
|
|
|
$
|
36,083
|
|
|
|
|
|
|
|
|
|
|
On March
14, 2008, $4.5 million of variable rate advances and $1.7 million of amortizing
mortgage advances were acquired with the Pavilion acquisition. These advances
will all mature during the 2008 second quarter.
The
putable advances can be put back to the Company at the option of the FHLB on a
quarterly basis. $19.0 million of the putable advances with a weighted average
rate of 2.72% are not yet callable by the FHLB. The call dates for these
advances range from January 14, 2009 to February 11, 2011 and the maturity dates
range from February 11, 2013 to March 12, 2018. The FHLB has the option to call
the remaining $45.0 million of putable advances with a weighted average rate of
5.25%. The maturity dates of these advances range from September 1, 2010 to
November 7, 2013. The strike-rate advances are putable at the option of the FHLB
only when the three month LIBOR rates exceed the agreed upon strike-rate in the
advance contract which ranges from 7.5% to 8.0%. The three month LIBOR rate at
March 31, 2008 was 2.69%. The weighted average rate of the strike-rate advances
is 4.18% and the maturity dates range from March 8, 2011 to February 25,
2013.
In March
2008, First Defiance borrowed $20.0 million under its revolving line of credit
with a commercial bank. The line of credit is secured by the stock of First
Defiance and the interest rate is ether the lender’s prime rate or LIBOR plus
1.50%, whichever is selected by First Defiance. First Defiance used the cash
from this borrowing to fund a portion of the cash purchase price paid to the
shareholder’s of Pavilion. The interest rate on that borrowing at March 31, 2008
was 4.59%.
Pavilion
had $10 million of Fed Funds Purchased as of the acquisition date. That
borrowing was repaid as of March 31, 2008.
11.
Borrowings (continued)
In March
2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust
II (Trust Affiliate II) that issued $15 million of Guaranteed Capital Trust
Securities (Trust Preferred Securities). In connection with this transaction,
the Company issued $15.5 million of Junior Subordinated Deferrable Interest
Debentures (Subordinated Debentures) to Trust Affiliate II. The Company formed
Trust Affiliate II for the purpose of issuing Trust Preferred Securities to
third-party investors and investing the proceeds from the sale of these capital
securities solely in Subordinated Debentures of the Company. The Subordinated
Debentures held by Trust Affiliate II are the sole assets of that trust.
Distributions on the Trust Preferred Securities issued by Trust Affiliate II are
payable quarterly at a fixed rate equal to 6.441% for the first five years and a
floating interest rate based on three-month LIBOR plus 1.50% points, repricing
quarterly, thereafter.
The
Company also sponsores an affiliated trust, First Defiance Statutory Trust I
(Trust Affiliate I), that issued $20 million of Trust Preferred Securities in
2005. In connection with this transaction, the Company issued $20.6 million of
Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed for
the purpose of issuing Trust Preferred Securities to third-party investors and
investing the proceeds from the sale of these capital securities solely in
Subordinated Debentures of the Company. The Junior Debentures held by Trust
Affiliate I are the sole assets of the trust. Distributions on the Trust
Preferred Securities issued by Trust Affiliate I are payable quarterly at a
variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate
payable on the Trust Preferred Securities issued by Trust Affiliate I was 4.18%
and 6.37% on March 31, 2008 and December 31, 2007 respectively.
The Trust
Preferred Securities issued by Trust Affiliates I and II are subject to
mandatory redemption, in whole or part, upon repayment of the Subordinated
Debentures. The Company has entered into agreements that fully and
unconditionally guarantee the Trust Preferred Securities subject to the terms of
the guarantees. The Trust Preferred Securities and Subordinated Debentures
issued by Trust Affiliate I mature on December 15, 2035 but may be redeemed by
the issuer at par after October 28, 2010. The Trust Preferred Securities issued
by Trust Affiliate II mature on June 15, 2037, but may be redeemed at the
Company’s option at any time on or after June 15, 2012, or at any time upon
certain events.
A summary
of all junior debentures issued by the Company to affiliates follows. These
amounts represent the par value of the obligations owed to these affiliates,
including the Company’s equity interest in the trusts. Junior subordinated
debentures owed to the following affiliates were as follows:
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
First
Defiance Statutory Trust I due December 2035
|
|
$
|
20,619
|
|
|
$
|
20,619
|
|
First
Defiance Statutory Trust II due June 2037
|
|
|
15,464
|
|
|
|
15,464
|
|
Total
junior subordinated debentures owed to unconsolidated subsidiary
Trusts
|
|
$
|
36,083
|
|
|
$
|
36,083
|
|
Interest
on both issues of trust preferred securities may be deferred for a period of up
to five years at the option of the issuer.
12.
Commitments, Guarantees and Contingent Liabilities
Loan
commitments are made to accommodate the financial needs of First Defiance’s
customers; however, there are no long-term, fixed-rate loan commitments that
result in market risk. Standby letters of credit obligate the Company to pay a
third party beneficiary when a customer fails to repay an outstanding loan or
debt instrument, or fails to perform some contractual non-financial obligation.
Standby letters of credit are issued to address customers’ financing needs and
to facilitate customers’ trade transactions.
If
amounts are drawn under standby letters of credit, such amounts are treated as
loans. Both loan commitments and standby letters of credit have credit risk,
essentially the same as that involved in extending loans to customers, and are
subject to the Company’s normal credit policies. Collateral (e.g., securities,
receivables, inventory and equipment) is obtained based on management’s credit
assessment of the customer.
The
Company’s maximum obligation to extend credit for loan commitments (unfunded
loan and unused lines of credit) and standby letters of credit was as
follows:
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
|
|
(In
Thousands)
|
|
Loan
commitments
|
|
$
|
378,539
|
|
|
$
|
280,152
|
|
Standby
Letters of Credit
|
|
|
18,921
|
|
|
|
9,147
|
|
Total
|
|
$
|
397,460
|
|
|
$
|
289,299
|
|
The
remaining weighted average life for outstanding standby letters of credit was
less than one year at March 31, 2008. The Company had $3.7 million of standby
letters of credit with a life longer than one year.
13.
Postretirement Benefits
First
Defiance sponsors a defined benefit postretirement plan that is intended to
supplement Medicare coverage for certain retirees who meet minimum age
requirements. A description of employees or former employees eligible for
coverage is included in Footnote 16 in the financial statements included in
First Defiance’s 2007 Annual Report on Form 10-K.
Net
periodic postretirement benefit costs include the following components for the
three month periods ended March 31, 2008 and 2007:
|
|
Three
Months Ended
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
Thousands)
|
|
Service
cost-benefits attributable
to
service during the period
|
|
$
|
13
|
|
|
$
|
12
|
|
Interest
cost on accumulated
postretirement
benefit obligation
|
|
|
37
|
|
|
|
31
|
|
Net
amortization and deferral
|
|
|
15
|
|
|
|
11
|
|
Net
periodic postretirement
benefit cost
|
|
$
|
65
|
|
|
$
|
54
|
|
14.
Income Taxes
First
Defiance adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109
(“FIN 48”) on January
1, 2007. As of December 31, 2007 the Company had unrecognized tax benefits in
accordance with FIN 48 of $498,000. Details regarding these unrecognized tax
benefits are in Footnote 18 of First Defiance’s 2007 Annual Report on Form 10-K.
During the current quarter, there were no material changes to the amount of
unrecognized tax benefits nor to any assumptions regarding the calculation of
these unrecognized tax benefits.
Federal
tax returns for years ended December 31, 2004 and later are subject to audit by
the Internal Revenue Service.
Item 2. M
a
nagement's Discussion and Analysis of Financial Condition and
Results of Operations
General
First
Defiance Financial Corp. (“First Defiance” or “the Company”) is a holding
company which conducts business through its two wholly owned subsidiaries, First
Federal Bank of the Midwest (“First Federal”) and First Insurance and
Investments, Inc. (“First Insurance”). First Federal is a federally chartered
savings bank that provides financial services to communities based in northwest
Ohio, northeast Indiana, and southeastern Michigan where it operates 36 full
service branches. On March 14, 2008, First Defiance completed the acquisition of
Pavilion Bancorp, Inc. (“Pavilion”), which added eight banking centers in
southeast Michigan, expanding the Company’s reach to markets adjacent to its
existing branch network. First Federal provides a broad range of financial
services including checking accounts, savings accounts, certificates of deposit,
real estate mortgage loans, commercial loans, consumer loans, home equity loans
and trust services. First Insurance sells a variety of property and casualty,
group health and life, and individual health and life insurance products and
investment and annuity products. Insurance products are sold through First
Insurance’s offices in Defiance and Bowling Green, Ohio while investment and
annuity products are sold through registered investment representatives located
at certain First Federal banking center locations.
First
Defiance invests in U.S. Treasury and federal government agency obligations,
obligations of municipal and other political subdivisions, mortgage-backed
securities which are issued by federal agencies, corporate bonds, and
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs"). Management determines the appropriate classification of all
such securities at the time of purchase in accordance with FASB Statement No.
115,
Accounting for Certain
Investments in Debt and Equity Securities
.
Securities
are classified as held-to-maturity when First Defiance has the positive intent
and ability to hold the security to maturity. Held-to-maturity securities are
stated at amortized cost and had a recorded value of $1.1 million at March 31,
2008. Securities not classified as held-to-maturity are classified as
available-for-sale, which are stated at fair value and had a recorded value of
$123.6 million at March 31, 2008. The available-for-sale portfolio consists of
U.S. Treasury securities and obligations of U.S. Government corporations and
agencies ($27.6 million), certain municipal obligations ($30.8 million), CMOs
and REMICs ($23.9 million), mortgage backed securities ($32.3 million) and
preferred stock ($8.9 million).
In
accordance with SFAS No. 115, unrealized holding gains and losses deemed
temporary on available-for-sale securities are reported in a separate component
of stockholders' equity, net of tax, and are not reported in earnings until
realized. Net unrealized holding gains on available-for-sale securities were
$52,000 at March 31, 2008, or $34,000 after considering the related deferred tax
liability.
The
profitability of First Defiance is primarily dependent on its net interest
income and non-interest income. Net interest income is the difference between
interest income on interest-earning assets, principally loans and securities,
and interest expense on interest-bearing deposits, Federal Home Loan Bank
advances, and other borrowings. The Company’s non-interest income
includes
deposit
and loan servicing fees, mortgage banking income, and insurance commissions.
First Defiance's earnings also depend on the provision for loan losses and
non-interest expenses, such as employee compensation and benefits, occupancy and
equipment expense, deposit insurance premiums, and miscellaneous other expenses,
as well as federal income tax expense.
Forward-Looking
Information
Certain
statements contained in this quarterly report that are not historical facts,
including but not limited to statements that can be identified by the use of
forward-looking terminology such as “may”, “will”, “expect”, “anticipate”, or
“continue” or the negative thereof or other variations thereon or comparable
terminology are “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21B of the Securities Act
of 1934, as amended. Actual results could differ materially from those indicated
in such statements due to risks, uncertainties and changes with respect to a
variety of market and other factors.
Changes in Financial
Condition
At March
31, 2008, First Defiance's total assets, deposits and stockholders' equity
amounted to $1.89 billion, $1.41 billion and $194.8 million, respectively,
compared to $1.61 billion, $1.22 billion and $166.0 million, respectively, at
December 31, 2007.
Net loans
receivable (excluding loans held for sale) increased $241.0 million to $1.52
billion at March 31, 2008 compared to $1.28 billion at December 31, 2007. The
increase in loans receivable between December 31, 2007 and March 31, 2008
included increases in commercial and non-residential real estate loans (up
$131.6 million), commercial loans (up $49.7 million), one-to-four family
residential real estate loans (up $33.5 million), home equity and improvement
loans (up $23.5 million), construction loans (up $4.2 million), and consumer
loans (up $3.5 million). Of the $241.0 million increase in loans receivable,
$231.2 million was the result of the Pavilion acquisition. The remaining growth
is primarily in the commercial and non-residential real estate loan
categories.
The
investment securities portfolio increased $11.2 million to $124.6 million at
March 31, 2008 from $113.5 million at December 31, 2007. The increase is the
result of $11.0 million of securities being purchased during the first three
months of 2008 mostly offset by $6.3 million of securities being matured or
called in the period and principal pay downs of $2.2 million in CMOs and
mortgage-backed securities. First Defiance also acquired $9.1 million of
investment securities through the Pavilion acquisition. The unrealized gain in
the investment portfolio decreased to $52,000 at March 31, 2008 from $560,000 at
December 31, 2007.
Deposits
increased from $1.22 billion at December 31, 2007 to $1.41 billion as of March
31, 2008. Of the $195.8 million increase, non-interest bearing demand deposits
increased $46.5 million to $168.0 million, savings deposits increased $38.3
million to $144.2 million, interest-bearing demand deposits and money market
accounts increased $66.6 million to $409.0 million, and retail time deposits
increased $44.4 million to $692.4 million. As of March 14, 2008, Pavilion’s
deposits included $45.6 million in non-interest-bearing checking accounts, $39.7
million in interest-bearing demand deposits, $26.2 million in savings, and $97.5
million in certificates of deposit. Excluding the Pavilion acquisition, deposits
declined $13.2 million in the first three months of 2008. This
decline
is mainly due to not matching aggressive pricing on certificates of deposits as
they matured. As these deposits declined, First Defiance replaced them with
advances from the Federal Home Loan Bank.
The FHLB
advances increased $24.4 million to $164.0 million at March 31, 2008 from $139.5
million at December 31, 2007. First Defiance added $19.0 million in putable
advances in the first three months of 2008 which have attractive rates with one
to two year lock-out periods before they can be called by the FHLB. First
Defiance also acquired $6.2 million of advances in the Pavilion acquisition.
Those advances all mature during the 2008 second quarter.
Stockholders’
equity increased from $166.0 million at December 31, 2007 to $194.8 million at
March 31, 2008. The increase is primarily the result of issuing 1,036,861 shares
of common stock at $26.117 per common share to Pavilion shareholders. The
Company also recorded net income of $3.4 million, realized $555,000 of proceeds
from stock option exercises, declared $2.1 million of cash dividends, and
repurchased $462,000 of treasury shares.
Average Balances, Net
Interest Income and Yields Earned and Rates Paid
The
following table presents for the periods indicated the total dollar amount of
interest from average interest-earning assets and the resultant yields, as well
as the interest expense on average interest-bearing liabilities, expressed both
in thousands of dollars and rates, and the net interest margin. The table
reports interest income from tax-exempt loans and investment on a tax-equivalent
basis. All average balances are based upon daily balances.
|
|
Three Months Ended March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Interest(1)
|
|
|
Rate(2)
|
|
|
Balance
|
|
|
Interest(1)
|
|
|
Rate(2)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
receivable
|
|
$
|
1,326,468
|
|
|
$
|
22,826
|
|
|
|
6.92
|
%
|
|
$
|
1,226,240
|
|
|
$
|
22,308
|
|
|
|
7.38
|
%
|
Securities
|
|
|
116,717
|
|
|
|
1,675
|
|
|
|
5.80
|
|
|
|
112,999
|
|
|
|
1,596
|
|
|
|
5.72
|
|
Interest-earning
deposits
|
|
|
14,087
|
|
|
|
99
|
|
|
|
2.83
|
|
|
|
1,124
|
|
|
|
11
|
|
|
|
3.97
|
|
FHLB
stock and other
|
|
|
18,610
|
|
|
|
243
|
|
|
|
5.25
|
|
|
|
18,585
|
|
|
|
292
|
|
|
|
6.37
|
|
Total
interest-earning assets
|
|
|
1,475,882
|
|
|
|
24,843
|
|
|
|
6.77
|
|
|
|
1,358,948
|
|
|
|
24,207
|
|
|
|
7.22
|
|
Non-interest-earning
assets
|
|
|
169,554
|
|
|
|
|
|
|
|
|
|
|
|
151,228
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,645,436
|
|
|
|
|
|
|
|
|
|
|
$
|
1,510,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,111,711
|
|
|
$
|
8,670
|
|
|
|
3.14
|
%
|
|
$
|
1,030,831
|
|
|
$
|
9,540
|
|
|
|
3.75
|
%
|
FHLB
advances and other
|
|
|
146,520
|
|
|
|
1,655
|
|
|
|
4.54
|
|
|
|
159,840
|
|
|
|
2,003
|
|
|
|
5.08
|
|
Notes
payable
|
|
|
25,958
|
|
|
|
194
|
|
|
|
3.01
|
|
|
|
22,501
|
|
|
|
169
|
|
|
|
3.05
|
|
Subordinated
debentures
|
|
|
36,281
|
|
|
|
529
|
|
|
|
5.86
|
|
|
|
20,899
|
|
|
|
337
|
|
|
|
6.54
|
|
Total
interest-bearing liabilities
|
|
|
1,320,470
|
|
|
|
11,048
|
|
|
|
3.37
|
|
|
|
1,234,071
|
|
|
|
12,049
|
|
|
|
3.96
|
|
Non-interest
bearing deposits
|
|
|
124,643
|
|
|
|
-
|
|
|
|
|
|
|
|
97,934
|
|
|
|
-
|
|
|
|
|
|
Total
including non-interest bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
demand
deposits
|
|
|
1,445,113
|
|
|
|
11,048
|
|
|
|
3.07
|
|
|
|
1,332,005
|
|
|
|
12,049
|
|
|
|
3.67
|
|
Other
non-interest-bearing liabilities
|
|
|
28,630
|
|
|
|
|
|
|
|
|
|
|
|
17,043
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
1,473,743
|
|
|
|
|
|
|
|
|
|
|
|
1,349,048
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
171,693
|
|
|
|
|
|
|
|
|
|
|
|
161,128
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stock-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
holders'
equity
|
|
$
|
1,645,436
|
|
|
|
|
|
|
|
|
|
|
$
|
1,510,176
|
|
|
|
|
|
|
|
|
|
Net
interest income; interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate
spread
|
|
|
|
|
|
$
|
13,795
|
|
|
|
3.40
|
%
|
|
|
|
|
|
$
|
12,158
|
|
|
|
3.26
|
%
|
Net
interest margin (3)
|
|
|
|
|
|
|
|
|
|
|
3.76
|
%
|
|
|
|
|
|
|
|
|
|
|
3.63
|
%
|
Average
interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
average interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liabilities
|
|
|
|
|
|
|
|
|
|
|
112
|
%
|
|
|
|
|
|
|
|
|
|
|
110
|
%
|
________________________________
(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%.
|
(3)
|
Net
interest margin is net interest income divided by average interest-earning
assets.
|
Results of
Operations
Three Months Ended March 31,
2008 and 2007
On a
consolidated basis, First Defiance’s net income for the quarter ended March 31,
2008 was $3.4 million compared to income of $3.6 million for the comparable
period in 2007. On a per share basis, basic and diluted earnings per share for
the three months ended March 31, 2008 were $0.48 and $0.47, respectively,
compared to basic and diluted earnings per share of $0.51 and $0.50,
respectively, for the quarter ended March 31, 2007.
Net Interest
Income
.
The
Federal Reserve Board influences the general market rates of interest, including
the deposit and loan rates offered by many financial institutions. The targeted
federal funds rate, which is established by the Federal Reserve Board’s Open
Market Committee, lowered the target rate by 1.0% in 2007 and by an additional
2.0% during the first three months of 2008, to 2.25%. The targeted federal funds
rate drives the Company’s prime rate, which is used to price a substantial
balance of loans in the commercial and home equity portfolios. The prime
interest rate began 2007 at 8.25% and decreased .75% in the third quarter and
.25% in the fourth quarter of 2007 to end 2007 at 7.25%. During the first
quarter of 2008, the prime interest rate declined another 2.0% to 5.25%. First
Defiance effectively managed the impact of the change in the prime rate by
reducing its deposit rates and by changing the mix of its interest-bearing
liabilities.
Net
interest income was $13.6 million for the first quarter of 2008 compared to
$12.0 million in the first quarter of 2007. Net interest income, the difference
between interest income earned on interest-earning assets and interest expense
incurred on interest-bearing liabilities, is the most significant component of
First Defiance’s earnings and is affected by changes in the volumes, rates and
composition of interest-earning assets and interest-bearing liabilities. For the
first quarter of 2008, total interest income was $24.6 million, a $606,000
increase over the first quarter of 2007. The amount of interest income
recognized was impacted in the first quarter of 2008 by an increase in the
balance of loans that were delinquent by more than 90 days. It is the Company’s
policy to reverse interest accrued on loans when they become 90 days past due.
As a result of the increase in these non-performing loans, interest income was
reduced by $324,000 in the first quarter of 2008 compared to $165,000 for the
same period in 2007.
Interest
expense was $11.0 million for the first quarter of 2008 compared to $12.0
million in the first quarter of 2007. The majority of the decrease in interest
expense occurred in interest-bearing deposits, where despite average balances
increasing $80.9 million to $1.112 billion for the first quarter of 2008, the
cost of that funding decreased .61% between the 2007 and 2008 first quarters, to
3.14% from 3.75%.
Net
interest margin for the quarter ended March 31, 2008 was 3.76%, a .13%
improvement from the 2007 first quarter margin of 3.63%. The Company's interest
rate spread improved to 3.40% in the 2008 first quarter compared to 3.26% in the
same 2007 quarterly period. The margin was favorably impacted by an increase in
the average balance of non-interest bearing deposits, which were $124.6 million
in the first quarter of 2008 compared to $97.9 million in the same period in
2007. The Pavilion acquisition had a favorable impact on the margin as Pavilion
had historically
operated
at a higher margin than First Defiance. However, in the first quarter of 2008,
the Pavilion results were included in only the last 17 of the 91 day
quarter.
Provision
for Loan Losses.
The
provision for loan losses is determined by management as the amount to be added
to the allowance for loan losses after net charge-offs have been deducted to
bring the allowance to a level which, in management’s best estimate, is
necessary to absorb probable credit losses within the existing loan portfolio.
The provision for loan losses was $1.1 million in the first quarter of 2008
compared to $457,000 for the first quarter of 2007. The period over period
increase was due primarily to an increase in the loan loss reserve for one large
impaired loan caused by a reduction in the appraised value of that loan’s real
estate collateral. Excluding the specific allowance recorded for that one loan,
the Company’s provision would have been very consistent with the level of
provision expense recorded over the last several quarters. Charge-offs for the
first quarter of 2008 were $620,000 and recoveries of previously charged off
loans totaled $129,000 for net charge-offs of $491,000. By comparison, $383,000
of charge-offs were recorded in the 2007 first quarter and $99,000 of recoveries
were realized for net charge-offs of $284,000. As a percentage of average loans,
annualized net charge-offs were 0.15% for the first quarter of 2008 compared to
0.09% in the same period in 2007. Management’s expectation is that the ratio of
net charge-offs to average loans will be higher for the balance of the year,
both because of the acquisition and because of our market area’s overall
economic condition.
Non-performing
assets, which include non-accrual loans and real estate owned, increased to
$17.7 million at March 31, 2008 from $10.8 million at March 31, 2007 and from
$11.7 million at December 31, 2007. Non-performing assets and asset quality
ratios for First Defiance were as follows at March 31, 2008 and December 31,
2007:
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
|
|
(in
thousands)
|
|
Non-accrual
loans
|
|
$
|
14,275
|
|
|
$
|
9,217
|
|
Loans
over 90 days past due and still accruing
|
|
|
-
|
|
|
|
-
|
|
Total
non-performing loans
|
|
$
|
14,275
|
|
|
$
|
9,217
|
|
Real
estate owned (REO)
|
|
|
3,448
|
|
|
|
2,460
|
|
Total
non-performing assets
|
|
$
|
17,723
|
|
|
$
|
11,677
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loans losses as a percentage of total loans
|
|
|
1.21
|
%
|
|
|
1.08
|
%
|
Allowance
for loan losses as a percentage of non-
performing
assets
|
|
|
104.70
|
%
|
|
|
118.95
|
%
|
Allowance
for loan losses as a percentage of non-
performing
loans
|
|
|
129.99
|
%
|
|
|
150.70
|
%
|
Total
non-performing assets as a percentage of total assets
|
|
|
0.94
|
%
|
|
|
0.73
|
%
|
Total
non-performing loans as a percentage of total loans
|
|
|
0.93
|
%
|
|
|
0.71
|
%
|
Of the
$14.3 million in non-accrual loans, $3.0 million were 1-4 family residential
loans, $10.3 million were commercial or commercial real estate loans and $1.0
million were home equity or consumer loans.
While
non-performing assets increased to $17.7 million in the first quarter of 2008
compared to $11.7 million at December 31, 2007, $4.4 million in non-performing
loans and $1.2 million in other real estate owned (“OREO”) came with the
Pavilion acquisition. Non-performing loans originated by First Federal Bank
increased $658,000 during the first quarter of 2008 but OREO balances decreased
by $246,000.
First
Federal Bank’s Asset Review Committee meets monthly to review the status of
work-out strategies for all criticized relationships, which include all
non-accrual loans. Based on such factors as anticipated collateral values in
liquidation scenarios, cash flow projections, assessment of net worth of
guarantors and all other factors which may mitigate risk of loss, the Asset
Review Committee makes recommendations regarding required allowances and
proposed charge-offs which are approved by the Senior Loan Committee (in the
case of charge-offs) or the Loan Loss Reserve Committee (in the case of specific
allowances). At March 31, 2008 the specific allowance for loan losses recorded
against the $10.3 million of non-accrual commercial and commercial real estate
loans totaled $1.13 million. In management’s opinion, the allowance for loan
losses is appropriate. The allowance for loan losses at March 31, 2008 was $18.6
million compared to $13.9 million at December 31, 2007. The increase in the
allowance for loan losses is also impacted by acquiring Pavilion’s $4.1
allowance.
Non-Interest
Income
.
Total
non-interest income increased to $6.0 million in the first quarter of 2008,
compared with $5.6 million in the same period in 2007. Non-interest income was
slightly impacted by the Pavilion results which were included in the last 17 of
the 91 day quarter.
Service Fees.
Service fees and other charges increased by $105,000 or 4.1% in the 2008
first quarter compared to the same period in 2007. The increase was primarily
related to fees earned on debit cards.
Service
fees also include significant fees generated by First Defiance’s overdraft
privilege program. This program generally provides for the automatic payment of
modest overdraft limits on all accounts deemed to be in good standing when the
account is accessed using paper-based check processing, a teller withdrawal, a
point-of-sale terminal, an ACH transaction, or an ATM. Overdraft limits are
established for all customers without discrimination using a risk assessment
approach for each account classification. An allowance for losses is recognized
for any accounts that are overdrawn for 30 or more days. Accounts overdrawn for
more than 60 days are automatically charged off. Fees are charged as a one-time
fee per occurrence and the fee charged for an item that is paid is equal to the
fee charged for a non-sufficient fund item that is returned.
Overdrawn
balances, net of allowance for losses, are reflected as loans on First
Defiance’s balance sheet. The fees charged for this service are established
based both on the return of processing costs plus a profit, and on the level of
fees charged by competitors in the Company’s market area for similar services.
These fees are considered to be compensation for providing a service to the
customer and therefore are deemed to be non-interest income rather than interest
income. Fee income related the to overdraft privilege product, net of
adjustments to the allowance for uncollectible overdrafts, was $1.7 million for
both quarters ended March 31, 2008 and 2007.
Mortgage Banking
Activity.
Total revenue from the sale and servicing of mortgage loans
increased $332,000 to $1.1 million for the first quarter of 2008 compared to
$782,000 for the same period of
2007.
Gains realized from the sale of mortgage loans more than doubled to $1.1 million
from $512,000 in the first quarter of 2007. Mortgage loan servicing revenue
increased by $44,000 or 10.5% in the first quarter of 2008 compared to the first
quarter of 2007. The increases in gains and servicing revenue were partially
offset by increases of $211,000 in amortization of mortgage servicing rights and
a $132,000 increase in the valuation adjustment that management recognizes when
the value of mortgage servicing rights decline. The interest rate environment
that gives rise to increased mortgage origination activity also typically causes
increases in mortgage servicing rights amortization and impairment, creating a
natural hedge in the mortgage banking line of business.
Insurance and
Investment Sales Commission.
Insurance and investment sales commission
income increased $233,000, to $1.9 million in the first quarter of 2008, from
$1.7 million during the first quarter of 2007. The growth in insurance and
investment income is attributable to a full quarter of revenue from the late
February 2007 acquisition of Huber, Harger, Welt and Smith Agency in Bowling
Green, Ohio. First Insurance typically recognizes contingent revenues in the
first quarter. These revenues are bonuses paid by insurance carriers when the
Company achieves certain loss ratios and growth targets. In the first quarter of
2008, First Insurance earned $784,000 of contingent income compared to $754,000
in the same period of 2007.
Other
Non-Interest Income.
Other sources of non-interest income include gains
from the sale of non-mortgage loans, trust income, gains from the sale of
securities, earnings from bank-owned life insurance and other. The sale of
agricultural loans increased the first quarter of 2008 non-mortgage loan gains
by $30,000 to $35,000 compared to $5,000 in the first quarter of
2007.
Non-Interest
Expense.
Non-interest
expense increased to $13.5 million for the first quarter of 2008 compared to
$11.8 million for the same period in 2007. The 2008 first quarter amount
includes $750,000 of non-recurring costs associated with the Pavilion
acquisition. These costs included termination fees of certain contracts,
severance payments not accrued by the seller for employees who were not a part
of a severance plan and retention bonuses, and other non-recurring costs
associated with the completion of the acquisition and the transition of
operations. Management believes that the remaining acquisition related costs,
most of which will be incurred in the second quarter of 2008, will be between
$1.0 million to $1.25 million.
Compensation and
Benefits
. Compensation and benefits increased to $7.1 million for the
quarter ended March 31, 2008 from $6.6 million for the same period in 2007. In
the first quarter of 2008, the Company incurred approximately $90,000 of
compensation expense related to the 17 post-acquisition days of operating the
former Pavilion offices. Compensation also increased because of approximately
$250,000 in year-over-year annual pay increases and a full three months of
compensation associated with the Huber, Harger, Welt and Smith, compared to just
one month in the first quarter of 2007.
Occupancy
.
Occupancy costs increased $266,000 in the first quarter of 2008 partially
resulted from the Pavilion and Huber, Harger, Welt and Smith acquisitions which
increased expense $12,000 and $35,000, respectively, in the first quarter of
2008. However, the opening of First Federal’s new operations center in December
of 2007 increased occupancy costs by $161,000 in the first quarter of
2008.
Other
Non-Interest Expenses
. Other non-interest expenses (including state
franchise tax, data processing, amortization of intangibles and other) increased
by $117,000 to $3.9 million for the quarter ended March 31, 2008 from $3.8
million for the same period in 2007. Significant increases between the 2008 and
2007 first quarters include an increase in expense for state franchise tax and
data processing of $131,000 and $76,000, respectively, due mainly from the
normal growth of the Company. Amortization of intangibles increased $48,000 due
to recording amortization of the core deposit intangible recorded in conjunction
with the Pavilion acquisition. These costs were partially offset by a decrease
in other expenses of $138,000. The expenses that made up this reduction included
office supply expense (down $41,000) and checking charge-offs (down
$39,000).
The
efficiency ratio for the third quarter of 2008 was 67.75% compared to 66.26% for
the first quarter of 2007. If you exclude the impact of the acquisition related
costs, the efficiency ratio for the 2008 first quarter was 64.0%.
Income
Taxes.
First
Defiance computes federal income tax expense in accordance with FASB Statement
No. 109, which resulted in an effective tax rate of 32.59% for the quarter ended
March 31, 2008 compared to 32.76% for the same period in 2007. The effective tax
rate is lower than the Company’s statutory 35% rate because it has approximately
$30.8 million invested in municipal securities, and $28.7 million of bank owned
life insurance which are both exempt from federal tax. Those book-tax
differences are partially offset by the excess of fair value over cost of
allocated ESOP shares and costs associated with expensing incentive stock
options, which are not deductible for Federal income taxes.
Liquidity and Capital
Resources
As a
regulated financial institution, First Federal is required to maintain
appropriate levels of "liquid" assets to meet short-term funding
requirements.
First
Defiance generated $2.4 million of cash from operating activities during the
first three months of 2008. The Company's cash from operating activities
resulted from net income for the period, adjusted for various non-cash items,
including the provision for loan losses, depreciation and amortization of
mortgage servicing rights, gain on sales of securities, loans and property,
plant and equipment, ESOP expense related to release of shares, changes in loans
available for sale, interest receivable, other assets, and other liabilities.
The primary investing activity of First Defiance is the origination of loans,
which is funded with cash provided by operations, proceeds from the amortization
and prepayments of existing loans, the sale of loans, proceeds from the sale or
maturity of securities, borrowings from the FHLB, and customer
deposits.
At March
31, 2008, First Defiance had $125.5 million in outstanding loan commitments and
loans in process to be funded generally within the next six months and an
additional $272.0 million committed under existing consumer and commercial lines
of credit and standby letters of credit. Also at that date, First Defiance had
commitments to sell $23.8 million of loans held-for-sale. Also, the total amount
of certificates of deposit that are scheduled to mature by March 31, 2009 is
$482.0 million. First Defiance believes that it has adequate resources to fund
commitments as they arise and that it can adjust the rate on savings
certificates to retain deposits in changing interest rate
environments.
If First Defiance requires funds beyond its internal funding capabilities,
advances from the FHLB of Cincinnati and other financial institutions are
available.
First
Federal is required to maintain specified amounts of capital pursuant to
regulations promulgated by the OTS. The capital standards generally require the
maintenance of regulatory capital sufficient to meet a tangible capital
requirement, a core capital requirement, and a risk-based capital requirement.
The following table sets forth First Federal's compliance with each of the
capital requirements at March 31, 2008.
|
|
Core Capital
|
|
|
Risk-Based Capital
|
|
|
|
Adequately
Capitalized
|
|
|
Well
Capitalized
|
|
|
Adequately
Capitalized
|
|
|
Well
Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
capital
|
|
$
|
181,289
|
|
|
$
|
181,289
|
|
|
$
|
196,816
|
|
|
$
|
196,816
|
|
Minimum
required regulatory capital
|
|
|
72,601
|
|
|
|
90,770
|
|
|
|
129,308
|
|
|
|
161,634
|
|
Excess
regulatory capital
|
|
$
|
108,688
|
|
|
$
|
90,519
|
|
|
$
|
67,508
|
|
|
$
|
35,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
capital as a percentage of assets (1)
|
|
|
10.0
|
%
|
|
|
10.0
|
%
|
|
|
12.2
|
%
|
|
|
12.2
|
%
|
Minimum
capital required as a percentage of assets
|
|
|
4.0
|
%
|
|
|
5.0
|
%
|
|
|
8.0
|
%
|
|
|
10.0
|
%
|
Excess
regulatory capital as a percentage of assets
|
|
|
6.0
|
%
|
|
|
5.0
|
%
|
|
|
4.2
|
%
|
|
|
2.2
|
%
|
(1)
|
Core
capital is computed as a percentage of adjusted total assets of $1.82
billion. Risk-based capital is computed as a percentage of total
risk-weighted assets of $1.62
billion.
|
High
Loan-to-Value Mortgage Loans
The
majority of First Defiance’s mortgage loans are collateralized by one-to-four
family residential real estate, have loan-to-value ratios of 80% or less, and
are made to borrowers in good credit standing. First Federal usually requires
residential mortgage loan borrowers whose loan-to-value is greater than 80% to
purchase private mortgage insurance (PMI). First Federal does originate and
retain a limited number of residential mortgage loans with loan-to-value ratios
that exceed 80% where PMI is not required if the borrower possesses other
demonstrable strengths. The loan-to-value ratios on these loans are generally
limited to 85% and exceptions must be approved by First Federal’s senior loan
committee. Management monitors the balance of one-to-four family residential
loans, including home equity loans and committed lines of credit that exceed
certain loan-to-value standards (90% for owner occupied residences, 85% for
non-owner occupied residences and one-to-four family construction loans, 75% for
developed land and 65% for raw land). Total loans that exceed those standards at
March 31, 2008 totaled $32.6 million. These loans are generally paying as
agreed. First Defiance does not make interest-only first mortgage residential
loans, nor does it have residential mortgage loan products, or other consumer
products, that allow negative amortization.
Critical
Accounting Policies
First
Defiance has established various accounting policies which govern the
application of accounting principles generally accepted in the United States in
the preparation of its financial statements. The significant accounting policies
of First Defiance are described in the footnotes to
the
consolidated financial statements included in the Company’s Annual Report on
Form 10-K. Certain accounting policies involve significant judgments and
assumptions by management, which have a material impact on the carrying value of
certain assets and liabilities; management considers such accounting policies to
be critical accounting policies. Those policies which are identified and
discussed in detail in the Company’s Annual Report on Form 10-K include the
Allowance for Loan Losses and the Valuation of Mortgage Servicing Rights. There
have been no material changes in assumptions or judgments relative to those
critical policies during the first three months of 2008.
Item 3. Qualitative and
Quant
i
tative Disclosure About Market Risk
As
discussed in detail in the 2007 Annual Report on Form 10-K, First Defiance’s
ability to maximize net income is dependent on management’s ability to plan and
control net interest income through management of the pricing and mix of assets
and liabilities. Because a large portion of assets and liabilities of First
Defiance are monetary in nature, changes in interest rates and monetary or
fiscal policy affect its financial condition and can have significant impact on
the net income of the Company. First Defiance does not use off-balance sheet
derivatives to enhance its risk management, nor does it engage in trading
activities beyond the sale of mortgage loans.
First
Defiance monitors its exposure to interest rate risk on a monthly basis through
simulation analysis which measures the impact changes in interest rates can have
on net income. The simulation technique analyzes the effect of a presumed 100
basis point shift in interest rates (which is consistent with management’s
estimate of the range of potential interest rate fluctuations) and takes into
account prepayment speeds on amortizing financial instruments, loan and deposit
volumes and rates, non-maturity deposit assumptions and capital requirements.
The results of the simulation indicate that in an environment where interest
rates rise or fall 100 basis points over a 12 month period, using March 31, 2008
amounts as a base case, First Defiance’s net interest income would be impacted
by less than the board mandated guidelines of 10%.
Item 4. Controls an
d
Procedures
Disclosure
Controls are procedures designed to ensure that information required to be
disclosed in the Company's reports filed under the Exchange Act, such as this
report, is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms. Disclosure controls are also designed to
ensure that such information is accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance of achieving the
desired control objectives, as ours are designed to do, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
As of
March 31, 2008, an evaluation was carried out under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
its disclosure controls and
procedures
(as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the design and operation of these disclosure controls and
procedures were effective. No significant changes were made in the internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
FIRST
DEFIANCE FINANCIAL CORP.
PART
II-OTHER INFO
R
MATION
Item 1.
Leg
a
l Proceedings
First
Defiance is not engaged in any legal proceedings of a material
nature.
There
were no material changes to the risk factors as presented in First Defiance
Financial Corp.’s annual report on Form 10-K for the year ended
December 31, 2007.
Item 2.
Unregistered Sales of
E
quity Securities and Use of
Proceeds
Period
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
Per
Share
|
Total
Number of
Shares
Purchased
as
Part of
Publicly
Announced
Plans
or
Programs
|
Maximum
Number
of Shares
that
May Yet Be
Purchased
Under
the
Plans or
Programs
(a)
|
January
1, 2008 –
January
31, 2008
|
20,419
|
$21.06
|
20,419
|
102,440
|
February
1, 2008 –
February
29, 2008
|
-0-
|
n/a
|
-0-
|
102,440
|
March
1, 2008 –
March
31, 2008
|
1,659
|
$19.30
|
1,659
|
100,781
|
Total
for 2008
First
Quarter
|
22,078
|
$20.93
|
22,078
|
100,781
|
(a) On
July 18, 2003, the registrant announced that its Board of Directors had
authorized management to repurchase up to 10% of the Registrant’s common stock
through the open market or in any private transaction. The authorization, which
is for 639,828 shares, does not have an expiration date.
Item 3.
Defaults upon
Senior Securities
Item
4.
|
Submission
of
M
atters to a Vote of Security
Holders
|
At a
special meeting of shareholders held on December 31, 2007, the shareholders
approved an amendment to the Company’s Code of Regulation to permit the issuance
of uncertificated shares. The following is the tabulation of all votes timely
cast in person or by proxy by shareholders of First Defiance for the special
meeting:
|
FOR
|
AGAINST
|
ABSTAIN
|
|
5,733,190
|
94,170
|
31,765
|
At the
annual meeting of shareholders held on April 22, 2008, in Defiance, Ohio the
shareholders elected three directors to three-year terms. The following are
tabulations of all votes timely cast in person or by proxy by shareholders of
First Defiance for the annual meeting:
|
I.
|
Nominees
for Director with Three-year Terms Expiring in
2011:
|
|
NOMINEE
|
FOR
|
WITHHELD
|
|
|
Jean
A. Hubbard
|
5,916,933
|
194,504
|
|
|
James
L. Rohrs
|
5,986,172
|
125,265
|
|
|
Thomas
A. Voigt
|
5,942,711
|
168,726
|
|
Not
applicable.
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
|
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act
|
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act
|
FIRST
DEFIANCE FINANCIAL CORP.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed by the undersigned thereunto duly
authorized.
|
First
Defiance Financial Corp.
|
|
(Registrant)
|
|
|
|
|
|
|
Date:
May 12,
2008
|
By:
|
/s/ William J.
Small
|
|
|
William
J. Small
|
|
|
Chairman,
President and
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
Date:
May 12,
2008
|
By:
|
/s/ John C.
Wahl
|
|
|
John
C. Wahl
|
|
|
Executive
Vice President, Chief
|
|
|
Financial
Officer and
|
|
|
Treasurer
|
38
First Defiance Financial (NASDAQ:FDEF)
Historical Stock Chart
From May 2024 to Jun 2024
First Defiance Financial (NASDAQ:FDEF)
Historical Stock Chart
From Jun 2023 to Jun 2024