- GAAP EPS of $0.34 per share, Core EPS of $0.36 per share for 2008
second quarter DEFIANCE, Ohio, July 21 /PRNewswire-FirstCall/ --
First Defiance Financial Corp. (NASDAQ:FDEF) today announced that
net income for its second quarter ended June 30, 2008 totaled $2.74
million, or $0.34 per diluted share, compared to $3.61 million or
$0.50 per diluted share for the quarter ended June 30, 2007. The
2008 second quarter results included $262,000 of
acquisition-related charges associated with the March 14, 2008
acquisition of Pavilion Bancorp of Adrian Michigan (Pavilion) and
its subsidiary the Bank of Lenawee. Excluding the after-tax impact
of those charges, First Defiance had earnings of $2.91 million, or
$0.36 per diluted share, for the quarter ended June 30, 2008. For
the six month period ended June 30, 2008, First Defiance earned
$6.15 million or $0.80 per share compared to $7.22 million or $1.00
per share for the six month period ended June 30, 2007. Excluding
the after-tax cost of $1.0 million of acquisition related charges
from the 2008 results, First Defiance earned $6.81 million, or
$0.89 per share for the first half of 2008. The quarter results
include expense for provision for loan losses of $2.8 million in
the 2008 second quarter, compared with just $575,000 in the same
period in 2007. In addition to the provision expense, the 2008
second quarter also included approximately $752,000 of expense
($489,000 or $0.06 per share after tax) related to losses
associated with a former First Defiance investment advisor. While
management believes there is a possibility that part of the loss
may ultimately be recovered, the expense was recognized in the 2008
second quarter after a claim under the Company's fidelity bond was
denied by the insurance carrier. First Defiance also recognized
$432,000 of other-than-temporary impairment expense ($281,000 or
$0.03 per share after tax) on certain investment securities in the
2008 second quarter. "Like most banks, we navigated into strong
headwinds this quarter, especially on the credit side," said
William J. Small, Chairman, President and Chief Executive Officer
of First Defiance. "The increase in our provision expense is due
primarily to the deterioration of several large credits in our
commercial portfolio. The impairment expense relates to a number of
pooled trust preferred stock investments we purchased several years
ago, which included a small amount of the higher yielding equity.
Recent high-profile bank failures have significantly affected the
value of those equity notes, which bear the initial default risk in
the trust preferred pools, resulting in our recording some
other-than-temporary impairment expense." "Despite the bottom-line
quarterly results, I believe there are a lot of positive
developments this quarter," said Mr. Small. "Our margin improved
again this quarter and at 3.92% is up 40 basis points from the
margin we reported just six month ago for the 2007 fourth quarter.
Our loan growth continues to be very solid; our mortgage
origination business is very steady; and our deposit mix continues
to improve with non-interest-bearing deposits up to 12.7% of total
deposits at June 30, from 10.0% at December 31, 2007. Also, the
integration of the former Bank of Lenawee offices continues to be
successful. Overall our deposit balances in those offices has
increased by $299,000 or 0.15% from the acquisition date and our
core deposits, which exclude certificates of deposit, have
increased by $5.6 million or 5.0%." Charge-offs Slightly Elevated;
Acquisition Impacts Non-Performing Assets Charge-offs in the 2008
second quarter totaled $894,000 and recoveries totaled $81,000 for
a net of $813,000, or 0.21% of average loans (annualized). While
the level of net charge-offs is slightly elevated from the last
three reported quarters, charge-offs actually declined from the
2007 second quarter when First Defiance reported $910,000 of net
charge-offs, which represented 0.30% of average loans (annualized).
Total non-performing assets at June 30, 2008 increased to $20.86
million, which included $17.73 million of loans 90 days or more
past due and $3.13 million of Other Real Estate Owned (OREO). This
compares to $11.7 million of non-performing assets at December 31,
2007 ($9.2 million of loans 90 days or more past due and $2.5
million of OREO) and $9.8 million at June 30, 2007 ($6.4 million of
loans 90 days or more past due and $3.3 million of OREO).
Non-performing assets at June 30, 2008 include $6.8 million in
loans and $2.0 million in OREO related to the former Pavilion
operation. Excluding the acquired assets, the Company's overall
non-performing assets have increased by just $300,000 or less than
3% since the beginning of 2008. The ratio of the allowance for loan
losses to non-performing loans has steadily declined and is at
116.1% at June 30, 2008, compared to 150.7% at December 31, 2007.
AICPA Statement of Position 03-3, Accounting for Loans or Certain
Debt Securities Acquired in a Transfer (SOP 03-3) require that
impaired loans acquired in a transaction be recorded at their fair
value net of any expected credit losses. As such, those loans are
included in the non- performing loan balance (net of expected
credit losses) without any offsetting allowance for loan losses,
thus negatively impacting the comparative coverage ratios. "We
believe our allowance for loan losses is an accurate reflection of
the credit risk in our portfolio at this point in time," said Mr.
Small. "The increase in our provision expense this quarter can
primarily be attributed to 12 loans that were either charged off or
required specific allowances totaling $1.7 million. Overall our
allowance coverage is low in relation to our historic standards but
adequate for the potential losses we've identified. The current
credit environment will continue to present major challenges to the
banking industry for the foreseeable future and we will be affected
along with everyone else. However, our underwriting standards have
always been high and we are working hard to identify credit
problems early so they can be addressed and minimized."
"Delinquencies in our mortgage and home equity loan portfolios have
been better than anticipated but we remain concerned about these
loans," said Mr. Small. "Although we don't have subprime loans on
our balance sheet, falling housing values in our market areas,
especially in southeast Michigan, could have a negative impact on
our asset quality." Net Interest Margin Increased by 16 Basis
Points from the 2008 First Quarter Net interest income increased to
$16.2 million for the second quarter 2008, a 34.0% increase from
$12.1 million of net interest income earned in the 2007 second
quarter. Most of the increase can be attributed to the March 14,
2008 Pavilion acquisition. Net interest margin improved to 3.92%
for the 2008 second quarter, a 34 basis point improvement over last
year's second quarter margin of 3.58% and a 16 basis point
improvement from the 2008 first quarter margin of 3.76%. Yield on
interest earning assets declined by 90 basis points, to 6.30% from
7.20% in the 2007 second quarter while the cost of interest-
bearing liabilities decreased by 134 basis points, to 2.67% from
4.01%. The margin also was favorably impacted by an increase in
non-interest bearing deposits, which had an average balance of
$171.1 million in the 2008 second quarter compared to $101.6
million in the same period in 2007. The Pavilion acquisition had a
favorable impact on the margin as Pavilion has historically
operated at a higher margin than First Defiance. "We are pleased
with the continued improvement in our net interest margin," said
Mr. Small. "We anticipated some margin improvement resulting from
the Pavilion acquisition but we also aggressively cut deposit rates
as the Federal Reserve reduced the targeted Fed Funds rate. We
expect pressure on our margin will increase for the balance of the
year as CD rates are rising. We allowed a large amount of CDs to
run off rather than match competitors' pricing and it has greatly
benefited our margin. However, the need to fund our loan growth
requires us to be more competitive with those rates. Also, we are
starting to see rates on money market and other core savings
products creep up." Mortgage Banking, Service Fee Increases
Highlight Non-Interest Income Growth Non-interest income for the
2008 second quarter increased to $6.2 million from $5.7 million in
the second quarter of 2007. The increases were primarily in service
fees, which increased to $3.4 million from $2.7 million, and in
mortgage banking income, which increased to $1.5 million from $1.1
million. Those increases were partially offset by the $432,000
charge recorded in the 2008 second quarter for other-than-temporary
impairment of investment securities. Non-Interest Expenses Rise Due
to Acquisition, Other One-Time Expense Total non-interest expense
for First Defiance increased to $15.5 million for the quarter ended
June 30, 2008, an increase of 30.6% from the $11.9 million of
non-interest expense recognized in the 2007 second quarter.
Increases across the board are attributable to the Pavilion
acquisition, which closed late in the 2008 first quarter. Results
for the 2008 second quarter period also included $262,000 of one-
time acquisition-related charges, primarily costs to terminate
certain contracts at Pavilion and costs to grant prior service
credit to former Pavilion employees in the Company's Retiree
Medical Plan. Non-interest expenses also included the $752,000 of
losses recognized in the quarter related to the former investment
advisor. This expense was recorded in the 2008 second quarter after
coverage under the Company's fidelity bond policy was denied.
Year-To-Date Results For the six month period ended June 30, 2008,
net interest income totaled $29.8 million, a $5.7 million or 23.8%
increase over the first half of 2007. Average interest-earning
assets increased to $1.58 billion for the first half of 2008
compared to $1.37 billion in 2007, the result of the Pavilion
acquisition. Net interest margin for the first six months of 2008
was 3.85%, up 24 basis points from the 3.61% margin reported in the
six month period ended June 30, 2007. The provision for loan losses
for the first half of 2008 was $3.9 million, compared to just $1.0
million recorded during the first six months of 2007. Non-interest
income for the first half of 2008 was $12.2 million compared to
$11.3 million during the same period of 2007. The 2008 first half
non- interest income was reduced by $513,000 of
other-than-temporary impairment charges recognized for impaired
investment securities. Most of the non- interest income increase
was in service fees and other charges, which were $6.0 million for
the first half of 2008 compared to $5.2 million during the first
half of 2007. In addition, mortgage banking income increased by
$758,000 and insurance commission income increased by $138,000
between 2007 and 2008. Non-interest expense increased to $29.0
million for the first six months of 2008 from $23.7 million in
2007. Excluding one-time acquisition related charges of $1.0
million, non-interest expense increased by 18.3%. Most of this
increase relates to ongoing costs of operating the eight branches
acquired in the Pavilion acquisition. In addition, FDIC insurance
expense has increased by $397,000 due to changes in the assessment
rates and full utilization of credits issued by the FDIC early in
the 2008 first quarter. Also non-interest expense includes the
$752,000 of expense associated with losses related to a former
investment advisor. Total Assets at $1.93 Billion Total assets at
June 30, 2008 were $1.93 billion, compared to $1.61 billion at
December 31, 2007. Net loans receivable (excluding loans held for
sale) were $1.56 billion at June 30, 2008 compared to $1.28 billion
at December 31, 2007. Total deposits at June 30, 2008 were $1.43
billion compared to $1.22 billion at December 31, 2007, which
included non-interest bearing deposits at June 30, 2008 of $181.0
million compared to $121.6 million at December 31, 2007. Total
stockholders' equity increased to $194.3 million at June 30, 2008
compared to $166.0 million at the end of 2007, with the increase
attributable to the 1,036,861 shares of First Defiance issued in
the Pavilion acquisition. Also at June 30, 2008, goodwill and other
intangible assets totaled $65.3 million compared to $40.4 million
at December 31, 2007. The balance sheet changes are primarily
attributable to the Pavilion acquisition. Conference Call First
Defiance Financial Corp. will host a conference call at 11:00 a.m.
(EDT) on Tuesday, July 22, 2008 to discuss the earnings results and
business trends. The conference call may be accessed by calling
800-860-2442. Internet access to the call is also available (in
listen-only mode) at the following Web address:
http://www.talkpoint.com/viewer/starthere.asp?Pres=122283 . The
audio replay of the Internet Webcast will be available at
http://www.fdef.com/ until Wednesday, July 30, 2008. First Defiance
Financial Corp. First Defiance Financial Corp., headquartered in
Defiance, Ohio, is the holding company for First Federal Bank of
the Midwest and First Insurance & Investments. First Federal
operates 36 full service branches and 47 ATM locations in northwest
Ohio, southeast Michigan and Fort Wayne, Indiana. First Insurance
& Investments specializes in property and casualty and group
health and life insurance, with offices in Defiance and Bowling
Green, Ohio. For more information, visit the company's Web site at
http://www.fdef.com/. Financial Statements and Highlights Follow-
Safe Harbor Statement This news release may contain certain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21 B of the
Securities Act of 1934, as amended, which are intended to be safe
harbors created thereby. Those statements may include, but are not
limited to, all statements regarding intent, beliefs, expectations,
projections, forecasts and plans of First Defiance Financial Corp.
and its management, and specifically include statements regarding:
future movements of interest rates, the production levels of
mortgage loan generation, the ability to continue to grow loans and
deposits, the ability to benefit from a changing interest rate
environment, the ability to sustain credit quality ratios at
current or improved levels, the ability to sell OREO properties,
continued strength in the market area for First Federal Bank of the
Midwest, and the ability of the Company to grow in existing and
adjacent markets. These forward-looking statements involve numerous
risks and uncertainties, including those inherent in general and
local banking, insurance and mortgage conditions, competitive
factors specific to markets in which the Company and its
subsidiaries operate, future interest rate levels, legislative and
regulatory decisions or capital market conditions and other risks
and uncertainties detailed from time to time in the Company's
Securities and Exchange Commission (SEC) filings, including the
Company's Annual Report on Form 10-K for the year ended December
31, 2007. One or more of these factors have affected or could in
the future affect the Company's business and financial results in
future periods and could cause actual results to differ materially
from plans and projections. Therefore, there can be no assurances
that the forward-looking statements included in this news release
will prove to be accurate. In light of the significant
uncertainties in the forward- looking statements included herein,
the inclusion of such information should not be regarded as a
representation by the Company or any other persons, that the
objectives and plans of the Company will be achieved. All
forward-looking statements made in this news release are based on
information presently available to the management of the Company.
The Company assumes no obligation to update any forward-looking
statements. Consolidated Balance Sheets First Defiance Financial
Corp. (Unaudited) June 30, December 31, June 30, (in thousands)
2008 2007 2007 Assets Cash and cash equivalents Cash and amounts
due from depository institutions $44,621 $53,976 $41,836
Interest-bearing deposits 59 11,577 635 44,680 65,553 42,471
Securities Available-for sale, carried at fair value 119,564
112,370 113,184 Held-to-maturity, carried at amortized cost 1,035
1,117 1,288 120,599 113,487 114,472 Loans 1,582,751 1,289,696
1,245,027 Allowance for loan losses (20,578) (13,890) (13,417)
Loans, net 1,562,173 1,275,806 1,231,610 Loans held for sale 11,711
5,751 7,083 Mortgage servicing rights 9,348 5,973 5,777 Accrued
interest receivable 7,650 6,755 7,445 Federal Home Loan Bank stock
21,118 18,586 18,586 Bank Owned Life Insurance 28,950 28,423 27,993
Office properties and equipment 47,999 40,545 36,212 Real estate
and other assets held for sale 3,158 2,460 3,324 Goodwill 56,111
36,820 36,551 Core deposit and other intangibles 9,195 3,551 3,834
Other assets 6,233 5,694 5,317 Total Assets $1,928,925 $1,609,404
$1,540,675 Liabilities and Stockholders' Equity
Non-interest-bearing deposits $181,034 $121,563 $107,111
Interest-bearing deposits 1,246,107 1,096,295 1,060,087 Total
deposits 1,427,141 1,217,858 1,167,198 Advances from Federal Home
Loan Bank 191,895 139,536 128,685 Notes payable and other interest-
bearing liabilities 59,039 30,055 27,572 Subordinated debentures
36,083 36,083 36,083 Advance payments by borrowers for tax and
insurance 599 762 470 Deferred taxes 3,882 1,306 990 Other
liabilities 16,006 17,850 15,020 Total liabilities 1,734,645
1,443,450 1,376,018 Stockholders' Equity Preferred stock - - -
Common stock, net 127 117 117 Additional paid-in-capital 140,297
112,651 112,289 Stock acquired by ESOP - (202) (309) Accumulated
other comprehensive loss (2,053) (415) (1,181) Retained earnings
128,536 126,630 123,521 Treasury stock, at cost (72,627) (72,827)
(69,780) Total stockholders' equity 194,280 165,954 164,657 Total
liabilities and stockholders' equity $1,928,925 $1,609,404
$1,540,675 Consolidated Statements of Income (Unaudited) First
Defiance Financial Corp. Three Months Ended Six Months Ended (in
thousands, except per share June 30, June 30, amounts) 2008 2007
2008 2007 Interest Income: Loans $24,506 $22,601 $47,319 $44,900
Investment securities 1,462 1,420 2,947 2,851 Interest-bearing
deposits 15 210 113 221 FHLB stock dividends 254 301 497 593 Total
interest income 26,237 24,532 50,876 48,565 Interest Expense:
Deposits 7,522 10,054 16,193 19,594 FHLB advances and other 1,545
1,614 3,200 3,617 Subordinated debentures 456 585 984 922 Notes
Payable 468 157 662 326 Total interest expense 9,991 12,410 21,039
24,459 Net interest income 16,246 12,122 29,837 24,106 Provision
for loan losses 2,797 575 3,855 1,032 Net interest income after
provision for loan losses 13,449 11,547 25,982 23,074 Non-interest
Income: Service fees and other charges 3,417 2,715 6,039 5,233
Mortgage banking income 1,501 1,076 2,616 1,858 Gain on sale of
non-mortgage loans 8 61 43 66 Loss on securities (432) - (513) -
Insurance and investment sales commissions 1,267 1,361 3,202 3,064
Trust income 118 99 229 185 Income from Bank Owned Life Insurance
254 313 527 607 Other non-interest income 17 45 22 264 Total
Non-interest Income 6,150 5,670 12,165 11,277 Non-interest Expense:
Compensation and benefits 7,318 6,634 14,441 13,186 Occupancy 1,944
1,405 3,613 2,808 State franchise tax 513 355 1,007 718 Acquisition
related charges 262 - 1,012 - Data processing 1,134 944 2,163 1,897
Amortization of intangibles 420 170 611 313 Other non-interest
expense 3,924 2,374 6,144 4,731 Total Non-interest Expense 15,515
11,882 28,991 23,653 Income before income taxes 4,084 5,335 9,156
10,698 Income taxes 1,349 1,724 3,002 3,481 Net Income $2,735
$3,611 $6,154 $7,217 Earnings per share: Basic $0.34 $0.51 $0.81
$1.01 Diluted $0.34 $0.50 $0.80 $1.00 Core operating earnings per
share*: Basic $0.36 $0.51 $0.89 $1.01 Diluted $0.36 $0.50 $0.89
$1.00 Average Shares Outstanding: Basic 8,057 7,129 7,625 7,115
Diluted 8,089 7,229 7,664 7,220 * - See Non-GAAP Disclosure
Reconciliations Financial Summary and Comparison First Defiance
Financial Corp. (Unaudited) Three Months Ended (dollars in
thousands, except per June 30, share data) 2008 2007 % change
Summary of Operations Tax-equivalent interest income (1) 26,453
24,709 7.1 Interest expense 9,991 12,410 (19.5) Tax-equivalent net
interest income (1) 16,462 12,299 33.8 Provision for loan losses
2,797 575 386.4 Tax-equivalent NII after provision for loan loss
(1) 13,665 11,724 16.6 Securities losses (432) - NM Non-interest
income-excluding securities losses 6,582 5,670 16.1 Non-interest
expense 15,515 11,882 30.6 Non-interest expense-excluding non-core
charges 15,253 11,882 28.4 One time acquisition related charges 262
- NM Income taxes 1,349 1,724 (21.8) Net Income 2,735 3,611 (24.3)
Core operating earnings (2) 2,905 3,611 (19.6) Tax equivalent
adjustment (1) 216 177 22.0 At Period End Assets 1,928,925
1,540,675 25.2 Earning assets 1,736,238 1,385,803 25.3 Loans
1,582,751 1,245,027 27.1 Allowance for loan losses 20,578 13,417
53.4 Deposits 1,427,141 1,167,198 22.3 Stockholders' equity 194,280
164,657 18.0 Average Balances Assets 1,898,165 1,527,863 24.2
Earning assets 1,689,398 1,376,030 22.8 Deposits and
interest-bearing liabilities 1,678,026 1,344,186 24.8 Loans
1,544,409 1,231,192 25.4 Deposits 1,423,266 1,157,793 22.9
Stockholders' equity 195,845 164,591 19.0 Stockholders' equity /
assets 10.32% 10.77% (4.2) Per Common Share Data Net Income Basic
$0.34 $0.51 (33.3) Diluted 0.34 0.50 (32.0) Core operating earnings
(2) Basic $0.36 $0.51 (28.8) Diluted 0.36 0.50 (28.1) Dividends
0.26 0.25 4.0 Market Value: High $20.00 $30.00 (33.3) Low 15.90
26.71 (40.5) Close 16.01 29.82 (46.3) Book Value 23.93 22.94 4.3
Tangible Book Value 15.89 17.31 (8.2) Shares outstanding, end of
period (000) 8,118 7,178 13.1 Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.92% 3.58% 9.4 Return on
average assets -GAAP 0.58% 0.95% (39.0) Return on average assets
-Core Operating 0.62% 0.95% (35.2) Return on average equity- GAAP
5.62% 8.80% (36.2) Return on average equity- Core Operating 5.97%
8.80% (32.2) Efficiency ratio (3) -GAAP 67.33% 66.12% 1.8
Efficiency ratio (3) -Core Operating 66.19% 66.12% 0.1 Effective
tax rate 33.03% 32.31% 2.2 Dividend payout ratio (basic) 76.47%
49.02% 56.0 Financial Summary and Comparison First Defiance
Financial Corp. Six months ended (dollars in thousands, except per
June 30, share data) 2008 2007 % change Summary of Operations
Tax-equivalent interest income (1) 51,296 48,916 4.9 Interest
expense 21,039 24,459 (14.0) Tax-equivalent net interest income (1)
30,257 24,457 23.7 Provision for loan losses 3,855 1,032 273.5
Tax-equivalent NII after provision for loan loss (1) 26,402 23,425
12.7 Securities losses (513) - NM Non-interest income-excluding
securities losses 12,678 11,277 12.4 Non-interest expense 28,991
23,653 22.6 Non-interest expense-excluding non-core charges 27,979
23,653 18.3 One time acquisition related charges 1,012 - NM Income
taxes 3,002 3,481 (13.8) Net Income 6,154 7,217 (14.7) Core
operating earnings (2) 6,812 7,217 (5.6) Tax equivalent adjustment
(1) 420 351 19.7 At Period End Assets Earning assets Loans
Allowance for loan losses Deposits Stockholders' equity Average
Balances Assets 1,771,801 1,519,019 16.6 Earning assets 1,581,487
1,367,489 15.6 Deposits and interest-bearing liabilities 1,561,570
1,338,096 16.7 Loans 1,435,438 1,228,716 16.8 Deposits 1,329,810
1,143,279 16.3 Stockholders' equity 183,769 162,860 12.8
Stockholders' equity / assets 10.37% 10.72% (3.3) Per Common Share
Data Net Income Basic $0.81 $1.01 (19.8) Diluted 0.80 1.00 (20.0)
Core operating earnings (2) Basic $0.89 $1.01 (11.9) Diluted 0.89
1.00 (11.1) Dividends 0.52 0.50 4.0 Market Value: High $22.51
$30.25 (25.6) Low 15.90 26.71 (40.5) Close 16.01 29.82 (46.3) Book
Value 23.93 22.94 4.3 Tangible Book Value 15.89 17.31 (8.2) Shares
outstanding, end of period (000) 8,118 7,178 13.1 Performance
Ratios (annualized) Tax-equivalent net interest margin (1) 3.85%
3.61% 6.6 Return on average assets -GAAP 0.70% 0.96% (27.2) Return
on average assets -Core Operating 0.77% 0.96% (19.5) Return on
average equity- GAAP 6.73% 8.94% (24.7) Return on average equity-
Core Operating 7.45% 8.94% (16.6) Efficiency ratio (3) -GAAP 67.52%
66.19% 2.0 Efficiency ratio (3) -Core Operating 65.17% 66.19% (1.5)
Effective tax rate 32.79% 32.54% 0.8 Dividend payout ratio (basic)
64.20% 49.50% 29.7 (1) Interest income on tax-exempt securities and
loans has been adjusted to a tax-equivalent basis using the
statutory federal income tax rate of 35% (2) Core operating
earnings = Net income plus after tax effect of acquisition related
and other one-time charges. See Non-GAAP Disclosure Reconciliation.
(3) Efficiency ratio = Non-interest expense divided by sum of tax-
equivalent net interest income plus non-interest income, excluding
securities gains or losses, net and asset sales gains, net. NM
Percentage change not meaningful Non-GAAP Disclosure
Reconciliations First Defiance Financial Corp. Management believes
that the presentation of the non-GAAP financial measures in this
release assists investors when comparing results period-to- period
in a more meaningful and consistent manner and provides a better
measure of results for First Defiance's ongoing operations. Core
operating earnings are net income adjusted to exclude discontinued
operations, merger, integration and restructuring expenses and the
results of certain significant transactions not representative of
ongoing operations. Core Operating Earnings Three months ended Six
months ended (dollars in thousands, except per June 30, June 30,
share data) 2008 2007 2008 2007 Net Income $2,735 $3,611 $6,154
$7,217 Acquisition related charges 262 - 1,012 - Tax effect (92) -
(354) - After-tax non-operating items 170 - 658 - Core operating
earnings $2,905 $3,611 $6,812 $7,217 Acquisition related charges in
2008 reflect charges associated with the acquisition of Pavilion
Bancorp. Core operating earnings is used as the numerator to
calculate core operating return on average assets, core operating
return on average equity and core operating earnings per share.
Additionally, non-operating items are deducted from non-interest
expense Income from Mortgage Banking Revenue from sales and
servicing of mortgage loans consisted of the following: Three
months ended Six months ended June 30, June 30, (dollars in
thousands) 2008 2007 2008 2007 Gain from sale of mortgage loans
$1,041 $805 $2,184 $1,317 Mortgage loan servicing revenue
(expense): Mortgage loan servicing revenue 682 423 1,148 844
Amortization of mortgage servicing rights (389) (189) (740) (330)
Mortgage servicing rights valuation adjustments 167 37 24 27 460
271 432 541 Total revenue from sale and servicing of mortgage loans
$1,501 $1,076 $2,616 $1,858 Three Months Ended June 30, 2008
Average Yield Balance Interest(1) Rate(2) Interest-earning assets:
Loans receivable $1,544,409 $24,536 6.39% Securities 121,506 1,648
5.43% Interest Bearing Deposits 2,616 15 2.31% FHLB stock 20,867
254 4.90% Total interest-earning assets 1,689,398 26,453 6.30%
Non-interest-earning assets 208,767 Total assets $1,898,165
Deposits and Interest-bearing liabilities: Interest bearing
deposits $1,252,165 $7,522 2.42% FHLB advances and other 164,811
1,545 3.77% Other Borrowings 53,724 468 3.50% Subordinated
debentures 36,225 456 5.06% Total interest-bearing liabilities
1,506,925 9,991 2.67% Non-interest bearing deposits 171,101 - -
Total including non-interest-bearing demand deposits 1,678,026
9,991 2.39% Other non-interest-bearing liabilities 24,294 Total
liabilities 1,702,320 Stockholders' equity 195,845 Total
liabilities and stockholders' equity $1,898,165 Net interest
income; interest rate spread $16,462 3.63% Net interest margin (3)
3.92% Average interest-earning assets to average interest bearing
liabilities 112% Three Months Ended June 30, 2007 Average Yield
Balance Interest(1) Rate(2) Interest-earning assets: Loans
receivable $1,231,192 $22,613 7.37% Securities 111,756 1,585 5.67%
Interest Bearing Deposits 14,497 210 5.81% FHLB stock 18,585 301
6.50% Total interest-earning assets 1,376,030 24,709 7.20%
Non-interest-earning assets 151,833 Total assets $1,527,863
Deposits and Interest-bearing liabilities: Interest bearing
deposits $1,056,187 $10,054 3.82% FHLB advances and other 128,823
1,614 5.03% Other Borrowings 21,323 157 2.95% Subordinated
debentures 36,247 585 6.47% Total interest-bearing liabilities
1,242,580 12,410 4.01% Non-interest bearing deposits 101,606 - -
Total including non-interest-bearing demand deposits 1,344,186
12,410 3.70% Other non-interest-bearing liabilities 19,086 Total
liabilities 1,363,272 Stockholders' equity 164,591 Total
liabilities and stockholders' equity $1,527,863 Net interest
income; interest rate spread $12,299 3.19% Net interest margin (3)
3.58% Average interest-earning assets to average interest bearing
liabilities 111% Six Months Ended June 30, 2008 Average Yield
Balance Interest(1) Rate(2) Interest-earning assets: Loans
receivable $1,435,438 $47,363 6.64% Securities 119,112 3,323 5.61%
Interest Bearing Deposits 8,352 113 2.72% FHLB stock 18,585 497
5.38% Total interest-earning assets 1,581,487 51,296 6.52%
Non-interest-earning assets 190,314 Total assets $1,771,801
Deposits and Interest-bearing liabilities: Interest bearing
deposits $1,181,938 $16,193 2.76% FHLB advances and other 155,666
3,200 4.13% Other Borrowings 39,841 662 3.34% Subordinated
debentures 36,253 984 5.46% Total interest-bearing liabilities
1,413,698 21,039 2.99% Non-interest bearing deposits 147,872 - -
Total including non-interest-bearing demand deposits 1,561,570
21,039 2.71% Other non-interest-bearing liabilities 26,462 Total
liabilities 1,588,032 Stockholders' equity 183,769 Total
liabilities and stockholders' equity $1,771,801 Net interest
income; interest rate spread $30,257 3.53% Net interest margin (3)
3.85% Average interest-earning assets to average interest bearing
liabilities 112% Six Months Ended June 30, 2007 Average Yield
Balance Interest(1) Rate(2) Interest-earning assets: Loans
receivable $1,228,716 $44,922 7.37% Securities 112,377 3,180 5.70%
Interest Bearing Deposits 7,811 221 5.71% FHLB stock 18,585 593
6.43% Total interest-earning assets 1,367,489 48,916 7.21%
Non-interest-earning assets 151,530 Total assets $1,519,019
Deposits and Interest-bearing liabilities: Interest bearing
deposits $1,043,509 $19,594 3.79% FHLB advances and other 144,332
3,617 5.05% Other Borrowings 21,912 326 3.00% Subordinated
debentures 28,573 922 6.51% Total interest-bearing liabilities
1,238,326 24,459 3.98% Non-interest bearing deposits 99,770 - -
Total including non-interest-bearing demand deposits 1,338,096
24,459 3.69% Other non-interest-bearing liabilities 18,063 Total
liabilities 1,356,159 Stockholders' equity 162,860 Total
liabilities and stockholders' equity $1,519,019 Net interest
income; interest rate spread $24,457 3.23% Net interest margin (3)
3.61% Average interest-earning assets to average interest bearing
liabilities 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%. (2) Annualized (3) Net interest margin is net
interest income divided by average interest-earning assets.
Selected Quarterly Information First Defiance Financial Corp.
(dollars in thousands, except per share data) 2nd Qtr 1st Qtr 4th
Qtr 3rd Qtr 2nd Qtr 2008 2008 2007 2007 2007 Summary of Operations
Tax-equivalent interest income (1) $26,453 $24,843 $25,383 $25,177
$24,709 Interest expense 9,991 11,048 12,669 12,962 12,410
Tax-equivalent net interest income (1) 16,462 13,795 12,714 12,215
12,299 Provision for loan losses 2,797 1,058 603 671 575
Tax-equivalent NII after provision for loan losses (1) 13,665
12,737 12,111 11,544 11,724 Investment securities gains (432) (81)
- 21 - Non-interest income (excluding securities gains /losses)
6,582 6,096 5,268 5,563 5,670 Non-interest expense 15,515 13,476
12,161 12,296 11,882 Acquisition and other on-time charges 262 750
- - - Income taxes 1,349 1,653 1,474 1,515 1,724 Net income 2,735
3,419 3,558 3,129 3,611 Core operating earnings (2) 2,905 3,906
3,558 3,129 3,611 Tax equivalent adjustment (1) 216 204 186 188 177
At Period End Total assets $1,928,925 $1,886,047 $1,609,404
$1,579,946 $1,540,675 Earning assets 1,736,238 1,689,813 1,439,097
1,432,735 1,385,803 Loans 1,582,751 1,535,354 1,289,696 1,264,872
1,245,027 Allowance for loan losses 20,578 18,556 13,890 13,427
13,417 Deposits 1,427,141 1,413,701 1,217,858 1,208,164 1,167,198
Stockholders' equity 194,280 194,780 165,954 164,706 164,657
Stockholders' equity / assets 10.07% 10.33% 10.31% 10.42% 10.69%
Goodwill 56,111 57,315 36,820 36,515 36,551 Average Balances Total
assets $1,898,165 $1,645,436 $1,589,264 $1,550,174 $1,527,863
Earning assets 1,689,398 1,475,882 1,432,061 1,397,521 1,376,030
Deposits and interest-bearing liabilities 1,678,026 1,445,113
1,404,065 1,367,421 1,344,186 Loans 1,544,409 1,326,468 1,265,307
1,244,531 1,231,192 Deposits 1,423,266 1,236,354 1,212,486
1,177,594 1,157,793 Stockholders' equity 195,845 171,693 165,762
164,751 164,591 Stockholders' equity / assets 10.32% 10.43% 10.43%
10.63% 10.77% Per Common Share Data Net Income: Basic $0.34 $0.48
$0.51 $0.44 $0.51 Diluted 0.34 0.47 0.50 0.44 0.50 Core operating
earnings (2) Basic 0.36 0.54 0.51 0.44 0.51 Diluted 0.36 0.54 0.50
0.44 0.50 Dividends 0.26 0.26 0.26 0.25 0.25 Market Value: High
$20.00 $22.51 $26.93 $29.64 $30.00 Low 15.90 17.30 20.58 23.99
26.71 Close 16.01 18.35 22.02 27.00 29.82 Book Value 23.93 24.01
23.51 23.21 22.94 Shares outstanding, end of period (in thousands)
8,118 8,114 7,059 7,095 7,178 Performance Ratios (annualized)
Tax-equivalent net interest margin (1) 3.92% 3.76% 3.52% 3.47%
3.58% Return on average assets -GAAP 0.58% 0.84% 0.89% 0.80% 0.95%
Return on average assets -Core Operating 0.62% 0.95% 0.89% 0.80%
0.95% Return on average equity- GAAP 5.62% 8.01% 8.52% 7.53% 8.80%
Return on average equity- Core Operating 5.97% 9.15% 8.52% 7.53%
8.80% Efficiency ratio (3) -GAAP 67.33% 67.75% 67.63% 69.16% 66.12%
Efficiency ratio (3) -Core Operating 66.19% 63.98% 67.63% 69.16%
66.12% Effective tax rate 33.03% 32.59% 29.29% 32.62% 32.31%
Dividend payout ratio (basic) 76.47% 54.17% 50.98% 56.82% 49.02%
(1) Interest income on tax-exempt securities and loans has been
adjusted to a tax-equivalent basis using the statutory federal
income tax rate of 35% (2) See Non-GAAP Disclosure Reconciliation
(3) Efficiency ratio = Non-interest expense divided by sum of tax-
equivalent net interest income plus non-interest income, excluding
securities gains, net and asset sales gains, net. Selected
Quarterly Information First Defiance Financial Corp. (dollars in
thousands, except per share data) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
2nd Qtr 2008 2008 2007 2007 2007 Loan Portfolio Composition One to
four family residential real estate $251,887 $262,710 $229,588
$230,075 $234,819 Construction 83,279 66,283 56,698 15,392(1)
16,346(1) Commercial real estate 731,472 706,442 580,621 592,914
583,046 Commercial 351,812 332,772 283,072 267,897 255,022 Consumer
finance 41,251 41,209 37,743 38,280 40,693 Home equity and
improvement 153,715 151,563 128,080 127,641 123,936 Total loans
1,613,416 1,560,979 1,315,802 1,272,199 1,253,862 Less: Loans in
process 29,585 24,581 25,074 6,301 7,761 Deferred loan origination
fees 1,080 1,044 1,032 1,026 1,074 Allowance for loan loss 20,578
18,556 13,890 13,427 13,417 Net Loans $1,562,173 $1,516,798
$1,275,806 $1,251,445 $1,231,610 Allowance for loan loss activity
Beginning allowance $18,556 $13,890 $13,427 $13,417 $13,752
Provision for loan losses 2,797 1,058 603 671 575 Reserve from
acquisitions 38 4,099 - - - Credit loss charge-offs: One to four
family residential real estate 281 57 33 128 10 Commercial real
estate 319 464 135 586 936 Commercial 220 - 7 - 11 Consumer finance
56 27 42 25 23 Home equity and improvement 18 72 30 10 41 Total
charge-offs 894 620 247 749 1,021 Total recoveries 81 129 107 88
111 Net charge-offs (recoveries) 813 491 140 661 910 Ending
allowance $20,578 $18,556 $13,890 $13,427 $13,417 Credit Quality
Non-accrual loans $17,727 $13,497 $9,217 $8,523 $6,427 Loans over
90 days past due and still accruing - - - - - Total non- performing
loans (2) 17,727 13,497 9,217 8,523 6,427 Real estate owned (REO)
3,129 3,448 2,460 3,392 3,324 Total non- performing assets (2)
$20,856 $16,945 $11,677 $11,915 $9,751 Net charge-offs 813 491 140
661 910 Allowance for loan losses / loans 1.30% 1.21% 1.08% 1.06%
1.08% Allowance for loan losses / non- performing assets 98.67%
109.51% 118.95% 112.69% 137.60% Allowance for loan losses / non-
performing loans 116.08% 137.48% 150.70% 157.54% 208.76%
Non-performing assets / loans plus REO 1.32% 1.10% 0.90% 0.94%
0.78% Non-performing assets / total assets 1.08% 0.90% 0.73% 0.75%
0.63% Net charge-offs / average loans (annualized) 0.21% 0.15%
0.04% 0.21% 0.30% Deposit Balances Non-interest- bearing demand
deposits $181,034 $168,049 $121,563 $109,128 $107,111
Interest-bearing demand deposits and money market 401,401 408,979
342,367 330,168 314,923 Savings deposits 146,697 144,184 105,873
98,719 97,004 Retail time deposits less than $100,000 514,209
529,990 509,720 524,347 504,301 Retail time deposits greater than
$100,000 163,614 162,400 137,927 142,645 136,319 National/Brokered
time deposits 20,186 99 408 3,157 7,540 Total deposits $1,427,141
$1,413,701 $1,217,858 $1,208,164 $1,167,198 (1) Construction loans
to commercial loan customers were included in commercial real
estate loans prior to December 31, 2007. (2) Non-performing loans
consist of non-accrual loans that are contractually past due 90
days or more and loans that are deemed impaired under the criteria
of FASB Statement No. 114. Non-performing assets are non-
performing loans plus real estate and other assets acquired by
foreclosure or deed-in-lieu thereof. DATASOURCE: First Defiance
Financial Corp. CONTACT: William J. Small, Chairman, President and
CEO, +1-419-782-5015, Web site: http://www.fdef.com/
Copyright
First Defiance Financial (NASDAQ:FDEF)
Historical Stock Chart
From Aug 2024 to Sep 2024
First Defiance Financial (NASDAQ:FDEF)
Historical Stock Chart
From Sep 2023 to Sep 2024