- Diluted earnings per share of $0.92
for 2017 third quarter, up from $0.78 in the 2016 third
quarter
- Net income of $9.4 million for 2017
third quarter, up from $7.0 million in the 2016 third
quarter
- Return on average assets of 1.28%
for the 2017 third quarter, up from 1.16% in the 2016 third
quarter
- Net interest margin of 3.91% for the
2017 third quarter, up from 3.69% in the 2016 third
quarter
- Loan growth of $21.6 million during
2017 third quarter
- Deposit growth of $34.0 million
during the 2017 third quarter
- Non-performing assets of $29.7
million for 2017 third quarter, compared to $18.9 million for 2016
third quarter
First Defiance Financial Corp. (NASDAQ: FDEF) announced today
that net income for the third quarter ended September 30, 2017,
totaled $9.4 million, or $0.92 per diluted common share compared to
$7.0 million or $0.78 per diluted common share for the quarter
ended September 30, 2016. The third quarter 2017 includes the
results from the operations of Commercial Bancshares, Inc. and its
banking subsidiary Commercial Savings Bank (collectively “CSB”)
following their acquisition on February 24, 2017, and Corporate One
Benefits Agency, Inc. (“Corporate One”) acquired April 1, 2017.
“We are very pleased with our strong operating performance in
the third quarter, and our outlook continues to be very positive
for the remainder of the year,” said Donald P. Hileman, President
and Chief Executive Officer of First Defiance Financial Corp. “Our
growth in revenues and improved efficiency generated a return on
assets of 1.28% and diluted earnings per share up 17.9% from the
third quarter last year.”
Net Interest Income up Compared to Third Quarter 2016
Net interest income of $25.0 million in the third quarter of
2017 was up from $19.8 million in the third quarter of 2016. The
increase was mostly attributable to a full quarter of operations
from the CSB merger. Net interest margin was 3.91% for the third
quarter of 2017, up from 3.89% in the second quarter of 2017, and
up from 3.69% in the third quarter of 2016. Yield on interest
earning assets increased by 29 basis points, to 4.38% in the third
quarter of 2017 from 4.09% in the third quarter of 2016. The cost
of interest-bearing liabilities increased by 9 basis points in the
third quarter of 2017 to 0.61% from 0.52% in the third quarter of
2016.
“In the third quarter, our net interest margin stayed very
healthy; and improving organic growth trends in both loans and
deposits were noted,” said Hileman. “These factors coupled with the
growth from our Commercial Savings Bank merger completed earlier
this year, produced a strong increase in our net interest income,
which is up 26.2% over the third quarter last year.”
Non-Interest Income up from Third Quarter 2016
First Defiance’s non-interest income for the third quarter of
2017 was $9.5 million compared with $8.5 million in the third
quarter of 2016. The increase in total non-interest income was
largely due to the inclusion of operations from the CSB and
Corporate One mergers completed in 2017. In addition, the third
quarter of 2017 included gains of $158,000 from the sale of
securities compared to gains of $151,000 in the third quarter of
2016.
Mortgage banking income was $1.7 million in the third quarter of
2017, down from $2.0 million in the third quarter of 2016. Mortgage
originations totaled $71.8 million in the third quarter of 2017, up
seasonally from the second quarter of 2017 but down from $101.7
million in the same quarter last year. As a result of the lower
volumes, gains from the sale of mortgage loans decreased in the
third quarter of 2017 to $1.2 million from $1.7 million in the
third quarter of 2016. Mortgage loan servicing revenue was $911,000
in the third quarter of 2017, up from $885,000 in the third quarter
of 2016 and amortization of mortgage servicing rights declined to
$386,000 from $536,000 in the third quarter last year.
For the third quarter of 2017, commissions from the sale of
insurance products were $3.1 million, up from $2.5 million in the
third quarter of 2016, primarily due to added commissions from the
Corporate One merger. Service fees and other charges were $3.2
million in the third quarter of 2017, up from $2.8 million in the
third quarter of 2016. Trust income was $486,000 in the third
quarter of 2017, up 15.7% from $420,000 in the third quarter of
2016.
“This quarter’s non-interest income results continue to reflect
the benefits of our growing company, as well as the diversity of
our revenues. While mortgage banking volumes are lower than a year
ago, our recent mergers contributed strong increases in insurance
commissions and bank service fee income,” continued Hileman. “In
total, non-interest income grew 11.4% over this same period last
year.”
Non-Interest Expenses up from Third Quarter 2016
Total non-interest expense was $20.4 million in the third
quarter of 2017, an increase from $18.3 million in the third
quarter of 2016. The increase in non-interest expenses was mostly
due to the additional expenses from the operations of CSB and
Corporate One mergers completed in 2017. Compensation and benefits
increased to $11.8 million in the third quarter of 2017, compared
to $10.3 million in the third quarter of 2016. Occupancy expense
was $2.0 million and data processing expense was $1.9 million, up
from $1.8 million and $1.6 million, respectively, in the third
quarter of 2016. Other non-interest expense of $3.7 million in the
third quarter of 2017 was up from $3.6 million in the third quarter
of 2016.
Credit Quality
Non-performing loans totaled $29.2 million at September 30,
2017, an increase from $18.2 million at September 30, 2016. The
increase was mainly attributable to two loan relationships totaling
$13.9 million that were downgraded in the second quarter 2017. In
addition, First Defiance had $532,000 of real estate owned at
September 30, 2017, compared to $704,000 at September 30, 2016.
Accruing troubled debt restructured loans were $13.0 million at
September 30, 2017, compared with $9.1 million at September 30,
2016.
The third quarter 2017 results include net charge-offs of
$36,000 and a provision for loan losses of $462,000 compared with
net charge-offs of $40,000 and a provision of $15,000 for the same
period in 2016.
The allowance for loan loss as a percentage of total loans was
1.16% at September 30, 2017, compared with 1.15% at June 30, 2017,
and 1.35% at September 30, 2016. The decrease in the allowance for
loan loss as a percentage of total loans was primarily attributable
to the CSB acquisition. The CSB loans acquired were recorded at
fair value with purchase accounting adjustments discounting the
loan balance instead of an allowance for loan losses. For the CSB
loans acquired, the discount recorded totaled $4.2 million, or 1.8%
of acquired CSB loans at September 30, 2017.
“As anticipated, our credit quality stabilized in the third
quarter. Net loan losses returned to a lower level, coming in at
less than 0.01% of average loans for the quarter,” said Hileman.
“While total non-performing assets to total assets ended September
30, 2017 higher than expected at 1.01%, reduced levels are
projected going forward.”
Year-To-Date Results
For the nine-month period ended September 30, 2017, net income
totaled $22.9 million, or $2.29 per diluted common share, compared
to $21.5 million, or $2.37 per diluted common share for the nine
months ended September 30, 2016. The first nine months of 2017
includes the results from the operations of the CSB acquisition
completed on February 24, 2017, and Corporate One acquired on April
1, 2017. In addition, the first nine months of 2017 includes merger
and conversion expenses related to the acquisitions of $4.0
million, which had an after tax impact of $2.8 million, or $0.28
per diluted share.
Net interest income was $71.3 million for the first nine months
of 2017 compared with $58.4 million in the first nine months of
2016. Average interest-earning assets increased to $2.51 billion in
the first nine months of 2017 compared to $2.15 billion in the
first nine months of 2016. Net interest margin for the first nine
months of 2017 was 3.88%, up 15 basis points from the 3.73% margin
reported in the nine month period ended September 30, 2016.
The provision for loan losses in the first nine months of 2017
was $2.6 million compared to $432,000 recorded during the first
nine months of 2016.
Non-interest income for the first nine months of 2017 was $30.2
million compared to $25.7 million during the same period of 2016.
The first nine months of 2017 includes the operating results from
the CSB and Corporate One mergers completed in 2017 and a $1.5
million enhancement value gain related to the purchase of bank
owned life insurance in the first quarter of 2017.
Service fees and other charges were $9.1 million for the first
nine months of 2017, up from $8.2 million during the same period of
2016. Mortgage banking income was $5.3 million for the first nine
months of 2017 compared with $5.3 million during the same period of
2016. Insurance commissions rose to $9.8 million for the first nine
months of 2017 compared with $8.1 million for the same period of
2016. Non-interest income for the first nine months of 2017
included $425,000 of gains from the sale of securities compared
with securities gains of $509,000 during the same period of
2016.
Non-interest expense was $64.2 million for the first nine months
of 2017, up from $52.9 million for the same period of 2016.
Included in non-interest expense for the first nine months of 2017
were merger and conversion expenses of $4.0 million related to the
acquisitions. Compensation and benefits expense was $37.6 million
for the first nine months of 2017 compared with $30.3 million
during the same period of 2016. Expenses also included increases in
occupancy of $316,000, data processing of $1.1 million,
amortization of intangibles of $512,000 and other expenses of $2.0
million.
Total Assets at $2.93 Billion
Total assets at September 30, 2017, were $2.93 billion compared
to $2.48 billion at December 31, 2016, and $2.45 billion at
September 30, 2016. The increase reflected at September 30, 2017,
is primarily due to the acquisition of CSB effective February 24,
2017, which added $368.3 million to total assets, net of $12.3
million paid in cash, at consummation.
Net loans receivable (excluding loans held for sale) were $2.25
billion at September 30, 2017, compared to $1.91 billion at
December 31, 2016, and $1.90 billion at September 30, 2016. The
acquisition of CSB added $285.4 million to the loan portfolio. At
September 30, 2017, excluding the CSB acquired loans, net loans
receivable grew $64.5 million, or 3.4% from a year ago.
Also, at September 30, 2017, goodwill and other intangible
assets totaled $104.4 million compared to $63.1 million at December
31, 2016, and $63.3 million at September 30, 2016. The increase in
2017 was attributable to the acquisitions of CSB and Corporate One
which together added $42.2 to goodwill and intangibles.
Total deposits at September 30, 2017, were $2.36 billion
compared with $1.98 billion at December 31, 2016, and $1.93 billion
at September 30, 2016. The acquisition of CSB added $308.0 million
to total deposits. At September 30, 2017, excluding the CSB
acquired deposits, total deposits grew $125.0 million, or 6.5% from
a year ago.
Total stockholders’ equity was $367.9 million at September 30,
2017, compared to $293.0 million at December 31, 2016, and $292.1
million at September 30, 2016. The acquisition of CSB in 2017 added
$56.5 million to total equity.
Dividend to be Paid November 17
The Board of Directors declared a quarterly cash dividend of
$0.25 per common share payable November 17, 2017, to shareholders
of record at the close of business on November 10, 2017. The
dividend represents an annual dividend of 1.86 percent based on the
First Defiance common stock closing price on October 13, 2017.
First Defiance has approximately 10,149,185 common shares
outstanding.
Conference Call
First Defiance Financial Corp. will host a conference call at
11:00 a.m. ET on Tuesday, October 17, 2017, to discuss the earnings
results and business trends. The conference call may be accessed by
calling 1-877-444-1726. In addition, a live webcast may be accessed
at http://services.choruscall.com/links/fdef171017.html.
The replay of the conference call webcast will be available at
www.fdef.com until October 17, 2018, at 9:00 a.m. ET.
First Defiance Financial Corp.
First Defiance Financial Corp. (NASDAQ:FDEF), headquartered in
Defiance, Ohio, is the holding company for First Federal Bank of
the Midwest, First Insurance Group and Corporate One Benefits.
First Federal Bank operates 42 full-service branches and numerous
ATM locations in northwest and central Ohio, southeast Michigan and
northeast Indiana. First Insurance Group, including its division
Corporate One Benefits, is a full-service insurance agency with ten
offices throughout northwest Ohio.
For more information, visit the company’s website at
www.fdef.com.
Financial Statements and Highlights Follow-
Safe Harbor Statement
This news release may contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21 B of the Securities Act of 1934, as
amended, which are intended to be safe harbors created thereby.
Those statements may include, but are not limited to, all
statements regarding intent, beliefs, expectations, projections,
forecasts and plans of First Defiance Financial Corp. and its
management, and specifically include statements regarding: changes
in economic conditions, the nature, extent and timing of
governmental actions and reforms, future movements of interest
rates, the production levels of mortgage loan generation, the
ability to continue to grow loans and deposits, the ability to
benefit from a changing interest rate environment, the ability
to sustain credit quality ratios at current or improved levels, the
ability to sell real estate owned properties, continued strength in
the market area for First Federal Bank of the Midwest, and the
ability to grow in existing and adjacent markets. These
forward-looking statements involve numerous risks and
uncertainties, including those inherent in general and local
banking, insurance and mortgage conditions, competitive factors
specific to markets in which First Defiance and its subsidiaries
operate, future interest rate levels, legislative and regulatory
decisions or capital market conditions and other risks and
uncertainties detailed from time to time in our Securities and
Exchange Commission (SEC) filings, including our Annual Report on
Form 10-K for the year ended December 31, 2016. One or more of
these factors have affected or could in the future affect First
Defiance's business and financial results in future periods and
could cause actual results to differ materially from plans and
projections. Therefore, there can be no assurances that the
forward-looking statements included in this news release will prove
to be accurate. In light of the significant uncertainties in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by First
Defiance or any other persons, that our objectives and plans will
be achieved. All forward-looking statements made in this news
release are based on information presently available to the
management of First Defiance. We assume no obligation to update any
forward-looking statements.
As required by U.S. GAAP, First Defiance will evaluate the
impact of subsequent events through the issuance date of its
September 30, 2017 consolidated financial statements as part of its
Quarterly Report on Form 10-Q to be filed with the SEC.
Accordingly, subsequent events could occur that may cause First
Defiance to update its critical accounting estimates and to revise
its financial information from that which is contained in this news
release.
Consolidated Balance Sheets (Unaudited) First
Defiance Financial Corp. September 30, December
31, (in thousands)
2017 2016
Assets
Cash and cash equivalents Cash and amounts due from depository
institutions
$ 55,731 $ 53,003 Interest-bearing
deposits
69,000 46,000
124,731 99,003 Securities Available-for sale, carried at
fair value
260,034 250,992 Held-to-maturity, carried at
amortized cost
728 184
260,762 251,176 Loans
2,276,042 1,940,487
Allowance for loan losses
(26,341 )
(25,884 ) Loans, net
2,249,701 1,914,603 Loans held for sale
12,200 9,607 Mortgage servicing rights
9,693 9,595
Accrued interest receivable
9,864 6,760 Federal Home Loan
Bank stock
15,992 13,798 Bank Owned Life Insurance
65,811 52,817 Office properties and equipment
41,536
36,958 Real estate and other assets held for sale
532 455
Goodwill
98,370 61,798 Core deposit and other intangibles
6,061 1,336 Deferred taxes
267 2,212 Other assets
38,735 17,479
Total
Assets $ 2,934,255 $ 2,477,597
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits
$ 519,911 $ 487,663
Interest-bearing deposits
1,840,764
1,493,965 Total deposits
2,360,675 1,981,628 Advances
from Federal Home Loan Bank
104,555 103,943 Notes payable
and other interest-bearing liabilities
29,439 31,816
Subordinated debentures
36,083 36,083 Advance payments by
borrowers for tax and insurance
2,265 2,650 Other
liabilities
33,314 28,459 Total
Liabilities
2,566,331 2,184,579 Stockholders’ Equity
Preferred stock
- - Common stock, net
127 127
Additional paid-in-capital
160,653 126,390 Accumulated other
comprehensive income
2,138 215 Retained earnings
256,041 240,592 Treasury stock, at cost
(51,035 ) (74,306 ) Total stockholders’ equity
367,924 293,018
Total
Liabilities and Stockholders’ Equity $ 2,934,255
$ 2,477,597
Consolidated Statements of Income
(Unaudited) First Defiance Financial Corp.
Three Months Ended Nine Months Ended
September
30,
September
30,
(in thousands, except per share amounts)
2017
2016
2017 2016 Interest Income: Loans
$ 25,975 $ 20,264
$ 73,263 $ 59,242
Investment securities
1,688 1,498
5,195 4,671
Interest-bearing deposits
209 104
555 287 FHLB stock
dividends
209 137
562 413
Total interest income
28,081 22,003
79,575 64,613
Interest Expense: Deposits
2,391 1,635
6,357 4,613
FHLB advances and other
431 322
1,211 940
Subordinated debentures
239 191
682 548 Notes Payable
13 35
41 108 Total
interest expense
3,074 2,183
8,291 6,209 Net interest income
25,007 19,820
71,284 58,404 Provision for loan losses
462
15
2,635 432 Net interest income after
provision for loan losses
24,545 19,805
68,649 57,972
Non-interest Income: Service fees and other charges
3,153
2,765
9,073 8,208 Mortgage banking income
1,698 2,039
5,266 5,342 Gain on sale of non-mortgage loans
82 148
172 604 Gain on sale of securities
158 151
425
509 Insurance commissions
3,082 2,473
9,834 8,113
Trust income
486 420
1,400 1,256 Income from Bank
Owned Life Insurance
421 225
2,666 686 Other
non-interest income
415 305
1,348 1,019 Total Non-interest Income
9,495
8,526
30,184 25,737 Non-interest Expense: Compensation and
benefits
11,780 10,295
37,588 30,250 Occupancy
1,960 1,822
5,751 5,435 FDIC insurance premium
330 352
973 1,008 Financial institutions tax
404 446
1,418 1,339 Data processing
1,874
1,622
5,832 4,723 Amortization of intangibles
364 115
931 419 Other non-interest expense
3,728
3,640
11,718 9,739 Total Non-interest
Expense
20,440 18,292
64,211
52,913 Income before income taxes
13,600 10,039
34,622 30,796 Income taxes
4,219 2,994
11,753 9,318 Net Income
$ 9,381
$ 7,045
$ 22,869 $ 21,478 Earnings per
common share: Basic
$ 0.92 $ 0.78
$
2.31 $ 2.39 Diluted
$ 0.92 $ 0.78
$
2.29 $ 2.37 Average Shares Outstanding: Basic
10,149 8,976
9,913 8,980 Diluted
10,209 9,050
9,970 9,050
Financial Summary and Comparison
(Unaudited) First Defiance Financial Corp.
Three Months Ended Nine Months Ended
September
30,
September
30,
(dollars in thousands, except per share data)
2017
2016 % change
2017 2016 % change
Summary of
Operations Tax-equivalent interest income (1)
$
28,557 $ 22,449 27.2 %
$81,007 $ 65,994 22.7 %
Interest expense
3,074 2,183 40.8
8,291 6,209 33.5
Tax-equivalent net interest income (1)
25,483 20,266 25.7
72,716 59,785 21.6 Provision for loan losses
462 15
NM
2,635 432 NM Tax-equivalent NII after provision for loan
loss (1)
25,021 20,251 23.6
70,081 59,353 18.1
Investment Securities gains
158 151 4.6
425 509 (16.5
) Non-interest income (excluding securities gains/losses)
9,337 8,375 11.5
29,759 25,228 18.0 Non-interest
expense
20,440 18,292 11.7
64,211 52,913 21.4 Income
taxes
4,219 2,994 40.9
11,753 9,318 26.1 Net Income
9,381 7,045 33.2
22,869 21,478 6.5 Tax equivalent
adjustment (1)
476 446
6.7
1,432 1,381 3.7
At Period End Assets
2,934,255 2,450,040 19.8
Earning assets
2,633,996 2,240,747 17.5 Loans
2,276,042 1,925,694 18.2 Allowance for loan losses
26,341 25,923 1.6 Deposits
2,360,675 1,927,686 22.5
Stockholders’ equity
367,924
292,138 25.9
Average
Balances Assets
2,906,795 2,425,535 19.8
2,812,560 2,376,934 18.3 Earning assets
2,590,463
2,194,170 18.1
2,511,469 2,148,438 16.9 Loans
2,251,071 1,879,760 19.8
2,171,733 1,834,981 18.4
Deposits and interest-bearing liabilities
2,507,805
2,103,054 19.2
2,433,185 2,062,637 18.0 Deposits
2,338,817 1,929,368 21.2
2,264,930 1,889,284 19.9
Stockholders’ equity
363,612 288,609 26.0
345,192
283,411 21.8 Stockholders’ equity / assets
12.51 % 11.90 % 5.1
12.27
% 11.92 % 3.0
Per Common Share Data Net
Income Basic
$ 0.92 $ 0.78 17.9
$2.31 $ 2.39
(3.3 ) Diluted
0.92 0.78 17.9
2.29 2.37 (3.4 )
Dividends
0.25 0.22 13.6
0.75 0.66 13.6 Market Value:
High
$ 53.99 $ 46.83 15.3
$56.90 $ 46.83 21.5
Low
47.01 35.90 30.9
46.27 34.80 33.0 Close
52.49 44.64 17.6
52.49 44.64 17.6 Common Book Value
36.25 32.53 11.4
36.25 32.53 11.4 Tangible Common
Book Value (1)
25.96 25.49 1.9
25.96 25.49 1.9 Shares
outstanding, end of period (000)
10,149
8,980 13.0
10,149
8,980 13.0 Performance Ratios (annualized)
Tax-equivalent net interest margin (2)
3.91 % 3.69 %
6.0
3.88 % 3.73 % 3.9 Return on average assets
1.28 % 1.16 % 10.4
1.09 % 1.21 % (10.2
) Return on average equity
10.24 % 9.71 % 5.4
8.86 % 10.12 % (12.5 ) Efficiency ratio (3)
58.70 % 63.87 % (8.1 )
62.66 % 62.24 %
0.7 Effective tax rate
31.02 % 29.82 % 4.0
33.95 % 30.26 % 12.2 Dividend payout ratio (basic)
27.17 % 28.21 % (3.7 )
32.47 % 27.62 % 17.6
(1)
Tangible common book value = total
stockholders' equity less the sum of goodwill, core deposit and
other intangibles, and preferred stock divided by shares
outstanding at the end of the period.
(2)
Interest income on tax-exempt securities
and loans has been adjusted to a tax-equivalent basis using the
statutory federal income tax rate of 35%
(3)
Efficiency ratio = Non-interest expense
divided by sum of tax-equivalent net interest income plus
non-interest income, excluding securities gains or losses, net.
NM Percentage change not meaningful
Income from Mortgage Banking
Revenue from sales and servicing of mortgage loans
consisted of the following:
Three Months Ended
Nine Months Ended
September
30,
September
30,
(dollars in thousands)
2017 2016
2017
2016 Gain from sale of mortgage loans
$ 1,200
$ 1,683
$ 3,577 $ 4,103 Mortgage loan servicing
revenue (expense): Mortgage loan servicing revenue
911 885
2,769 2,638 Amortization of mortgage servicing rights
(386 ) (536 )
(1,101 ) (1,281 )
Mortgage servicing rights valuation adjustments
(27
) 7
21 (118
)
498 356
1,689 1,239 Total revenue from sale and
servicing of mortgage loans
$ 1,698 $ 2,039
$ 5,266 $ 5,342
Yield Analysis First Defiance
Financial Corp. Three Months Ended September 30,
(dollars in thousands)
2017 2016 Average Yield Average Yield
Balance Interest(1) Rate(2) Balance Interest(1) Rate(2)
Interest-earning assets: Loans receivable $ 2,251,071 $
26,025 4.59 % $ 1,879,760 $ 20,316 4.30 % Securities 259,310 2,114
3.29 % (3) 231,864 1,892 3.37 % (3) Interest Bearing Deposits
64,090 209 1.29 % 68,746 104 0.60 % FHLB stock 15,992
209 5.18 % 13,800 137 3.95 % Total interest-earning
assets 2,590,463 28,557 4.38 % 2,194,170 22,449 4.09 %
Non-interest-earning assets 316,332 231,365 Total
assets $ 2,906,795 $ 2,425,535
Deposits and Interest-bearing
liabilities: Interest bearing deposits $ 1,818,670 $ 2,391 0.52
% $ 1,487,465 $ 1,635 0.44 % FHLB advances and other 104,648 431
1.63 % 84,598 322 1.51 % Subordinated debentures 36,158 239 2.62 %
36,140 191 2.10 % Notes payable 28,182 13 0.18 %
52,948 35 0.26 % Total interest-bearing liabilities
1,987,658 3,074 0.61 % 1,661,151 2,183 0.52 % Non-interest bearing
deposits 520,147 - - 441,903 - - Total
including non-interest-bearing demand deposits 2,507,805 3,074 0.49
% 2,103,054 2,183 0.41 % Other non-interest-bearing liabilities
35,378 33,872 Total liabilities 2,543,183 2,136,926
Stockholders' equity 363,612 288,609 Total
liabilities and stockholders' equity $ 2,906,795 $ 2,425,535
Net interest income; interest rate spread $ 25,483 3.77 % $
20,266 3.57 % Net interest margin (4) 3.91 % 3.69 % Average
interest-earning assets to average interest bearing liabilities 130
% 132 %
Nine Months Ended September 30, 2017
2016 Average Yield Average Yield Balance Interest(1) Rate Balance
Interest(1) Rate
Interest-earning assets: Loans receivable $
2,171,733 $ 73,415 4.52 % $ 1,834,981 $ 59,395 4.32 % Securities
257,924 6,475 3.40 % (3) 230,058 5,899 3.55 % (3) Interest Bearing
Deposits 66,299 555 1.12 % 69,599 287 0.55 % FHLB stock
15,513 562 4.84 % 13,800 413 4.00 % Total
interest-earning assets 2,511,469 81,007 4.32 % 2,148,438 65,994
4.12 % Non-interest-earning assets 301,091 228,496
Total assets $ 2,812,560 $ 2,376,934
Deposits and
Interest-bearing liabilities: Interest bearing deposits $
1,743,769 $ 6,357 0.49 % $ 1,457,010 $ 4,613 0.42 % FHLB advances
and other 104,616 1,211 1.55 % 82,598 940 1.52 % Subordinated
debentures 36,155 682 2.51 % 36,140 548 2.03 % Notes payable
27,484 41 0.20 % 54,615 108 0.27 % Total
interest-bearing liabilities 1,912,024 8,291 0.58 % 1,630,363 6,209
0.51 % Non-interest bearing deposits 521,161 - -
432,274 - - Total including non-interest-bearing
demand deposits 2,433,185 8,291 0.46 % 2,062,637 6,209 0.40 % Other
non-interest-bearing liabilities 34,183 30,886 Total
liabilities 2,467,368 2,093,523 Stockholders' equity 345,192
283,411 Total liabilities and stockholders' equity $
2,812,560 $ 2,376,934 Net interest income; interest
rate spread $ 72,716 3.74 % $ 59,785 3.61 % Net interest margin (4)
3.88 % 3.73 % Average interest-earning assets to average interest
bearing liabilities 131 % 132 %
(1)
Interest on certain tax exempt loans and
securities is not taxable for Federal income tax purposes. In order
to compare the tax-exempt yields on these assets to taxable yields,
the interest earned on these assets is adjusted to a pre-tax
equivalent amount based on the marginal corporate federal income
tax rate of 35%.
(2)
Annualized
(3)
Securities yield = annualized interest
income divided by the average balance of securities, excluding
average unrealized gains/losses.
(4)
Net interest margin is net interest income
divided by average interest-earning assets.
Selected Quarterly Information First
Defiance Financial Corp.
(dollars in thousands, except per share data)
3rd Qtr
2017 2nd Qtr 2017 1st Qtr 2017 4th Qtr
2016 3rd Qtr 2016
Summary of Operations
Tax-equivalent interest income (1)
$ 28,557 $ 27,944
$ 24,505 $ 23,219 $ 22,449 Interest expense
3,074 2,826
2,391 2,231 2,183 Tax-equivalent net interest income (1)
25,483 25,118 22,114 20,988 20,266 Provision for loan losses
462 2,118 55 (149 ) 15 Tax-equivalent NII after provision
for loan losses (1)
25,021 23,000 22,059 21,137 20,251
Investment securities gains, net of impairment
158 267 - -
151 Non-interest income (excluding securities gains/losses)
9,337 9,873 10,549 8,293 8,375 Non-interest expense
20,440 20,630 23,142 18,180 18,292 Income taxes
4,219
3,677 3,857 3,436 2,994 Net income
9,381 8,347 5,140 7,365
7,045 Tax equivalent adjustment (1)
476
486 469 449
446
At Period End Total assets
$ 2,934,255 $ 2,890,507 $ 2,928,697 $ 2,477,151 $
2,450,040 Earning assets
2,633,996 2,596,674 2,639,325
2,261,068 2,240,747 Loans
2,276,042 2,254,435 2,238,006
1,940,487 1,925,694 Allowance for loan losses
26,341 25,915
25,749 25,884 25,923 Deposits
2,360,675 2,326,702 2,373,789
1,981,628 1,927,686 Stockholders’ equity
367,924 361,430
354,191 293,018 292,138 Stockholders’ equity / assets
12.54
% 12.50 % 12.09 % 11.83 % 11.92 % Goodwill
98,370 98,318
90,768 61,798 61,798
Average Balances Total assets
$
2,906,795 $ 2,908,483 $ 2,622,402 $ 2,458,952 $ 2,425,535
Earning assets
2,590,463 2,591,397 2,355,544 2,226,868
2,194,170 Loans
2,251,071 2,238,061 2,026,067 1,908,731
1,879,760 Deposits and interest-bearing liabilities
2,507,805 2,516,024 2,275,724 2,133,868 2,103,054 Deposits
2,338,817 2,346,336 2,109,637 1,954,631 1,929,368
Stockholders’ equity
363,612 357,523 314,442 292,301 288,609
Stockholders’ equity / assets
12.51 %
12.29 % 11.99 % 11.89 %
11.90 %
Per Common Share Data Net Income:
Basic
$ 0.92 $ 0.82 $ 0.54 $ 0.82 $ 0.78 Diluted
0.92 0.82 0.54 0.81 0.78 Dividends
0.25 0.25 0.25
0.22 0.22 Market Value: High
$ 53.99 $ 56.90 $ 51.15
$ 52.31 $ 46.83 Low
47.01 48.78 46.27 36.91 35.90 Close
52.49 52.68 49.51 50.74 44.64 Common Book Value
36.25
35.61 34.92 32.62 32.53 Shares outstanding, end of period (in
thousands)
10,149 10,149
10,143 8,983
8,980
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)
3.91 % 3.89 %
3.81 % 3.76 % 3.69 % Return on average assets
1.28 %
1.15 % 0.79 % 1.19 % 1.16 % Return on average equity
10.24
% 9.36 % 6.63 % 10.02 % 9.71 % Efficiency ratio (2)
58.70 % 58.96 % 70.85 % 62.09 % 63.87 % Effective tax
rate
31.02 % 30.58 % 42.87 % 31.81 % 29.82 % Common
dividend payout ratio (basic)
27.17 %
30.49 % 46.30 % 26.83 %
28.21 % (1) Interest income on tax-exempt securities
and loans has been adjusted to a tax-equivalent basis using the
statutory federal income tax rate of 35% (2) Efficiency ratio =
Non-interest expense divided by sum of tax-equivalent net interest
income plus non-interest income, excluding securities gains, net.
Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data)
3rd
Qtr 2017 2nd Qtr 2017 1st Qtr 2017 4th Qtr
2016 3rd Qtr 2016
Loan Portfolio Composition One to
four family residential real estate
$ 271,048 $
276,578 $ 276,931 $ 207,550 $ 209,097 Construction
244,920
234,688 199,724 182,886 177,075 Commercial real estate
1,205,695 1,182,087 1,193,906 1,040,562 1,043,820 Commercial
510,240 515,004 504,366 469,055 456,099 Consumer finance
29,009 28,860 27,696 16,680 17,251 Home equity and
improvement
132,220 130,429
132,965 118,429
118,165 Total loans
2,393,132 2,367,646
2,335,588 2,035,162 2,021,507 Less: Undisbursed loan funds
115,714 112,000 95,460 93,355 94,552 Deferred loan
origination fees
1,379 1,211 1,264 1,320 1,261 Allowance for
loan loss
26,341 25,915
25,749 25,884
25,923 Net Loans
$ 2,249,698
$ 2,228,520 $ 2,213,115 $
1,914,603 $ 1,899,771
Allowance for loan loss activity Beginning allowance
$ 25,915 $ 25,749 $ 25,884 $ 25,923 $ 25,948
Provision for loan losses
462 2,118 55 (149 ) 15 Credit loss
charge-offs: One to four family residential real estate 60 0 49 147
111 Commercial real estate
0 110 290 0 79 Commercial
64 2,027 0 234 26 Consumer finance
20 21 71 53 24
Home equity and improvement
92
100 54 98
74 Total charge-offs
236 2,258 464 532 314
Total recoveries
200 306
274 642 274
Net charge-offs (recoveries)
36
1,952 190 (110 )
40 Ending allowance
$ 26,341
$ 25,915 $ 25,749 $
25,884 $ 25,923
Credit
Quality Total non-performing loans (1)
$ 29,152 $
30,359 $ 15,057 $ 14,348 $ 18,198 Real estate owned (REO)
532 672 705
455 704 Total
non-performing assets (2)
$ 29,684 $
31,031 $ 15,762 $ 14,803
$ 18,902 Net charge-offs (recoveries)
36 1,952 190
(110 ) 40 Restructured loans, accruing (3)
13,044
10,521 9,814 10,544 9,113 Allowance for loan losses / loans
1.16 % 1.15 % 1.15 % 1.33 % 1.35 % Allowance for loan
losses / non-performing assets
88.74 % 83.51 % 163.36
% 174.86 % 137.14 % Allowance for loan losses / non-performing
loans
90.36 % 85.36 % 171.01 % 180.40 % 142.45 %
Non-performing assets / loans plus REO
1.30 % 1.38 %
0.70 % 0.76 % 0.98 % Non-performing assets / total assets
1.01 % 1.07 % 0.54 % 0.60 % 0.77 % Net charge-offs /
average loans (annualized)
0.01 % 0.35 % 0.04 % -0.02
% 0.01 %
Deposit Balances Non-interest-bearing
demand deposits
$ 519,911 $ 520,778 $ 579,943 $
487,663 $ 443,321 Interest-bearing demand deposits and money market
989,514 967,834 973,459 816,665 810,393 Savings deposits
296,230 288,643 288,498 243,369 241,016 Retail time deposits
less than $250,000
504,277 499,298 490,953 400,080 399,749
Retail time deposits greater than $250,000
50,743
50,149 40,936
33,851 33,207 Total
deposits
$ 2,360,675 $ 2,326,702
$ 2,373,789 $ 1,981,628 $
1,927,686
(1)
Non-performing loans consist of
non-accrual loans.
(2)
Non-performing assets are non-performing
loans plus real estate and other assets acquired by foreclosure or
deed-in-lieu thereof.
(3)
Accruing restructured loans are loans with
known credit problems that are not contractually past due and
therefore are not included in non-performing loans.
Loan Delinquency Information
First Defiance Financial Corp. (dollars
in thousands)
Total Balance Current
30 to 89 dayspast due
Non Accrual Loans September 30, 2017
One to four
family residential real estate
$ 271,048 $
265,873 $ 1,807 $ 3,368
Construction
244,920 244,920 - -
Commercial real estate
1,205,695 1,187,826 759
17,110 Commercial
510,240 500,755 1,415
8,070 Consumer finance
29,009 28,741
209 59 Home equity and improvement
132,220 130,199
1,476 545 Total loans
$
2,393,132 $ 2,358,314 $
5,666 $ 29,152 December 31, 2016
One to four
family residential real estate $ 207,550 $ 203,624 $ 998 $ 2,928
Construction 182,886 182,886 - - Commercial real estate 1,040,562
1,030,833 137 9,592 Commercial 469,055 468,038 10 1,007 Consumer
finance 16,680 16,438 151 91 Home equity and improvement
118,429 116,439 1,260 730
Total loans $ 2,035,162 $ 2,018,258 $ 2,556 $
14,348 September 30, 2016
One to four family residential real estate $
209,097 $ 205,471 $ 706 $ 2,920 Construction 177,075 177,075 - -
Commercial real estate 1,043,820 1,032,260 258 11,302 Commercial
456,099 452,669 185 3,245 Consumer finance 17,251 17,048 190 13
Home equity and improvement 118,165 116,653
794 718 Total loans $ 2,021,507
$ 2,001,176 $ 2,133 $ 18,198
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171016006204/en/
First Defiance Financial Corp.Donald P. Hileman,
419-782-5104President and CEOdhileman@first-fed.com
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