DEFIANCE, Ohio--(BUSINESS WIRE)--First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the second quarter ended June 30, 2017, totaled $8.3 million, or $0.82 per diluted common share compared to $7.3 million or $0.80 per diluted common share for the quarter ended June 30, 2016. The second 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.
“Our second quarter financial results clearly reflect the expected operating performance enhancements from our recent acquisitions as compared to the second quarter last year revenues grew 24.3%, the net interest margin was 3.89% up from 3.71%, and the efficiency ratio improved to 59.0% from 61.5%,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “While higher charge-offs for credit losses partially offset these improvements in the second quarter, we expect the benefits from our mergers to continue elevating our ongoing performance.”
Net Interest Income up Compared to Second Quarter 2016
Net interest income of $24.6 million in the second quarter of 2017 was up from $19.4 million in the second quarter of 2016. The increase was mostly attributable to a full quarter of operations from the CSB merger, but also included recovered interest and prepayment penalties totaling $307,000 compared to $119,000 in the second quarter last year. Net interest margin was 3.89% for the second quarter of 2017, up from 3.81% in the first quarter of 2017, and up from 3.71% in the second quarter of 2016. Yield on interest earning assets increased by 23 basis points, to 4.33% in the second quarter of 2017 from 4.10% in the second quarter of 2016. The cost of interest-bearing liabilities increased by 7 basis points in the second quarter of 2017 to 0.58% from 0.51% in the second quarter of 2016.
“Strong growth in our net interest income was driven by the successful Commercial Bancshares merger, our solid organic growth over the last year and our steady net interest margin,” said Hileman. “The combination of these factors generated net interest income growth of $5.2 million or 27.0% over the second quarter last year.”
Non-Interest Income up from Second Quarter 2016
First Defiance’s non-interest income for the second quarter of 2017 was $10.1 million compared with $8.6 million in the second 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 second quarter of 2017 included gains of $267,000 from the sale of securities compared to gains of $227,000 in the second quarter of 2016.
Mortgage banking income was $1.8 million in the second quarter of 2017, even with $1.8 million in the second quarter of 2016. Mortgage originations totaled $64.2 million in the second quarter of 2017, up seasonally from the first quarter of 2017 but down from $76.0 million in the same quarter last year. Gains from the sale of mortgage loans decreased in the second quarter of 2017 to $1.3 million from $1.4 million in the second quarter of 2016. Mortgage loan servicing revenue was $924,000 in the second quarter of 2017, up slightly from $876,000 in the second quarter of 2016. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $16,000 in the second quarter of 2017 compared with a negative adjustment of $104,000 in the second quarter of 2016. In addition, gains on the sale of non-mortgages, which include SBA and FSA loans, totaled $90,000 in the second quarter 2017 compared to $411,000 in the second quarter 2016.
For the second quarter of 2017, commissions from the sale of insurance products were $3.3 million, up from $2.5 million in the second quarter of 2016 primarily due to added commissions from the Corporate One merger. Service fees and other charges were $3.2 million in the second quarter of 2017, up from $2.8 million in the second quarter of 2016. Trust income was $464,000 in the second quarter of 2017, up 13.4% from $409,000 in the second quarter of 2016. Other non-interest income was $612,000 in the second quarter of 2017, up from $231,000 in the second quarter of 2016 mainly due to gains from the sale of real estate owned and sales of investments.
“Non-interest income growth this quarter reflects our expanding operations and the contributions from our recent mergers. Insurance commissions and bank service fees had strong gains compared to the second quarter last year, more than offsetting the decline in the gain on sale of non-mortgage loans,” continued Hileman. “Overall total non-interest income, excluding securities gains, increased 18.3% over this same period in the prior year.”
Non-Interest Expenses up from Second Quarter 2016
Total non-interest expense was $20.6 million in the second quarter of 2017, an increase from $17.3 million in the second quarter of 2016. The increase in non-interest expenses was mostly due to the additional expenses for the operations of CSB and Corporate One mergers completed in 2017. Compensation and benefits increased to $11.5 million in the second quarter of 2017, compared to $9.8 million in the second quarter of 2016. Both occupancy expense and data processing equaled $2.0 million, up from $1.8 million and $1.6 million, respectively, in the second quarter of 2016. Other non-interest expense of $4.0 million in the second quarter of 2017 was up from $3.2 million in the second quarter of 2016, which included $299,000 of merger related transaction costs recorded in the second quarter of 2017.
Credit Quality
Non-performing loans totaled $30.4 million at June 30, 2017, an increase from $16.4 million at June 30, 2016. The increase was mainly attributable to two loan relationships totaling $13.6 million that were downgraded in the second quarter. In addition, First Defiance had $672,000 of real estate owned at June 30, 2017, compared to $1.1 million at June 30, 2016. Accruing troubled debt restructured loans were $10.5 million at June 30, 2017, compared with $9.6 million at June 30, 2016.
As a result of the loan downgrades, the second quarter 2017 results include net charge-offs of $2.0 million and a provision for loan losses of $2.1 million compared with net recoveries $227,000 and a provision of $53,000 for the same period in 2016.
The allowance for loan loss as a percentage of total loans was 1.15% at June 30, 2017, compared with 1.15% at March 31, 2017 and 1.39% at June 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 $5.0 million, or 1.7% of acquired CSB loans at June 30, 2017.
“We were very disappointed in the loan downgrades and the rise in non-performing loan totals this quarter,” said Hileman. “After closely reviewing these situations, we remain confident in our lending and credit management practices. We believe that our overall asset quality is sound and that we will regain our improved position in the quarters ahead.”
Year-To-Date Results
For the six-month period ended June 30, 2017, net income totaled $13.5 million, or $1.37 per diluted common share, compared to $14.4 million, or $1.59 per diluted common share for the six months ended June 30, 2016. The first six 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 six months of 2017 includes merger and conversion expenses related to the acquisitions of $3.9 million, which had an after tax impact of $2.8 million, or $0.28 per diluted share.
Net interest income was $46.3 million for the first six months of 2017 compared with $38.6 million in the first six months of 2016. Average interest-earning assets increased to $2.47 billion in the first six months of 2017 compared to $2.13 billion in the first six months of 2016. Net interest margin for the first six months of 2017 was 3.86%, up 11 basis points from the 3.75% margin reported in the six month period ended June 30, 2016.
The provision for loan losses in the first six months of 2017 was $2.2 million compared to $417,000 recorded during the first six months of 2016.
Non-interest income for the first six months of 2017 was $20.7 million compared to $17.2 million during the same period of 2016. The first six 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 $5.9 million for the first six months of 2017, up from $5.4 million during the same period of 2016. Mortgage banking income was $3.6 million for the first six months of 2017 compared with $3.3 million during the same period of 2016. Insurance commissions rose to $6.8 million for the first six months of 2017 compared with $5.6 million for the same period of 2016. Non-interest income for the first six months of 2017 included $267,000 of gains from the sale of securities compared with securities gains of $358,000 during the same period of 2016.
Non-interest expense was $43.8 million for the first six months of 2017, up from $34.6 million for the same period of 2016. Compensation and benefits expense was $25.8 million for the first six months of 2017 compared with $20.0 million during the same period of 2016. Expenses also included increases in occupancy of $178,000, data processing of $857,000, amortization of intangibles of $263,000 and other expenses of $1.9 million.
Total Assets at $2.9 Billion
Total assets at June 30, 2017, were $2.89 billion compared to $2.48 billion at December 31, 2016, and $2.41 billion at June 30, 2016. The increase reflected at June 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 $2.23 billion at June 30, 2017, compared to $1.91 billion at December 31, 2016, and $1.86 billion at June 30, 2016. The acquisition of CSB added $285.4 million to the loan portfolio. At June 30, 2017, excluding the CSB acquired loans, net loans receivable grew $107.3 million, or 5.8% from a year ago.
Also, at June 30, 2017, goodwill and other intangible assets totaled $104.5 million compared to $63.1 million at December 31, 2016, and $63.4 million at June 30, 2016. The increase in 2017 was attributable to the acquisitions of CSB and Corporate One which together added $41.9 to goodwill and intangibles.
Total deposits at June 30, 2017, were $2.33 billion compared with $1.98 billion at December 31, 2016, and $1.92 billion at June 30, 2016. The acquisition of CSB added $308.0 million to total deposits. At June 30, 2017, excluding the CSB acquired deposits, total deposits grew $98.4 million, or 5.1% from a year ago.
Total stockholders’ equity was $361.4 million at June 30, 2017, compared to $293.0 million at December 31, 2016, and $286.6 million at June 30, 2016. The acquisition of CSB in 2017 added $56.5 million to total equity.
Dividend to be Paid August 25
The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable August 25, 2017, to shareholders of record at the close of business on August 18, 2017. The dividend represents an annual dividend of 1.90 percent based on the First Defiance common stock closing price on July 14, 2017. First Defiance has approximately 10,148,821 common shares outstanding.
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, July 18, 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/fdef170718.html.
The replay of the conference call Webcast will be available at www.fdef.com until July 18, 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 Web site 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 June 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. | ||||||||
| June 30, | December 31, | |||||||
| (in thousands) | 2017 | 2016 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Cash and amounts due from depository institutions | $ | 51,941 | $ | 53,003 | ||||
| Interest-bearing deposits | 60,000 | 46,000 | ||||||
| 111,941 |
|
99,003 | ||||||
| Securities |
|
|||||||
| Available-for sale, carried at fair value | 257,575 |
|
250,992 | |||||
| Held-to-maturity, carried at amortized cost | 733 | 184 | ||||||
| 258,308 | 251,176 | |||||||
| Loans | 2,254,435 | 1,940,487 | ||||||
| Allowance for loan losses | (25,915 | ) | (25,884 | ) | ||||
| Loans, net | 2,228,520 | 1,914,603 | ||||||
| Loans held for sale | 7,939 | 9,607 | ||||||
| Mortgage servicing rights | 9,680 | 9,595 | ||||||
| Accrued interest receivable | 8,376 | 6,760 | ||||||
| Federal Home Loan Bank stock | 15,992 | 13,798 | ||||||
| Bank Owned Life Insurance | 65,390 | 52,817 | ||||||
| Office properties and equipment | 42,588 | 36,958 | ||||||
| Real estate and other assets held for sale | 672 | 455 | ||||||
| Goodwill | 98,065 | 61,798 | ||||||
| Core deposit and other intangibles | 6,425 | 1,336 | ||||||
| Deferred Taxes | - | 2,212 | ||||||
| Other assets | 36,045 | 17,479 | ||||||
| Total Assets | $ | 2,889,941 | $ | 2,477,597 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Non-interest-bearing deposits | $ | 520,778 | $ | 487,663 | ||||
| Interest-bearing deposits | 1,805,924 | 1,493,965 | ||||||
| Total deposits | 2,326,702 | 1,981,628 | ||||||
| Advances from Federal Home Loan Bank | 104,830 | 103,943 | ||||||
| Notes payable and other interest-bearing liabilities | 30,606 | 31,816 | ||||||
| Subordinated debentures | 36,083 | 36,083 | ||||||
| Advance payments by borrowers for tax and insurance | 2,305 | 2,650 | ||||||
| Deferred taxes | 21 | - | ||||||
| Other liabilities | 27,964 | 28,459 | ||||||
| Total Liabilities | 2,528,511 | 2,184,579 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock | - | - | ||||||
| Common stock, net | 127 | 127 | ||||||
| Additional paid-in-capital | 160,404 | 126,390 | ||||||
| Accumulated other comprehensive income | 2,745 | 215 | ||||||
| Retained earnings | 249,196 | 240,592 | ||||||
| Treasury stock, at cost | (51,042 | ) | (74,306 | ) | ||||
| Total stockholders’ equity | 361,430 | 293,018 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 2,889,941 | $ | 2,477,597 | ||||
| Consolidated Statements of Income (Unaudited) | ||||||||||||
| First Defiance Financial Corp. | ||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||
| June 30, | June 30, | |||||||||||
| (in thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||
| Interest Income: | ||||||||||||
| Loans | $ | 25,318 | $ | 19,666 | $ | 47,288 | $ | 38,978 | ||||
| Investment securities | 1,752 | 1,543 | 3,507 | 3,173 | ||||||||
| Interest-bearing deposits | 201 | 134 | 346 | 183 | ||||||||
| FHLB stock dividends | 187 | 137 | 353 | 276 | ||||||||
| Total interest income | 27,458 | 21,480 | 51,494 | 42,610 | ||||||||
| Interest Expense: |
|
|||||||||||
| Deposits | 2,170 | 1,545 | 3,966 | 2,978 | ||||||||
| FHLB advances and other | 414 | 321 | 780 | 618 | ||||||||
| Subordinated debentures | 229 | 182 | 443 | 357 | ||||||||
| Notes Payable | 13 | 36 | 28 | 73 | ||||||||
| Total interest expense | 2,826 | 2,084 | 5,217 | 4,026 | ||||||||
| Net interest income | 24,632 | 19,396 | 46,277 | 38,584 | ||||||||
| Provision for loan losses | 2,118 | 53 | 2,172 | 417 | ||||||||
|
Net interest income after provision for loan losses |
22,514 | 19,343 | 44,105 | 38,167 | ||||||||
| Non-interest Income: | ||||||||||||
| Service fees and other charges | 3,161 | 2,799 | 5,920 | 5,443 | ||||||||
| Mortgage banking income | 1,830 | 1,764 | 3,568 | 3,303 | ||||||||
| Gain on sale of non-mortgage loans | 90 | 411 | 90 | 456 | ||||||||
| Gain on sale of securities | 267 | 227 | 267 | 358 | ||||||||
| Insurance commissions | 3,294 | 2,504 | 6,752 | 5,640 | ||||||||
| Trust income | 464 | 409 | 914 | 836 | ||||||||
| Income from Bank Owned Life Insurance | 422 | 230 | 2,245 | 461 | ||||||||
| Other non-interest income | 612 | 231 | 933 | 714 | ||||||||
| Total Non-interest Income | 10,140 | 8,575 | 20,689 | 17,211 | ||||||||
| Non-interest Expense: | ||||||||||||
| Compensation and benefits | 11,473 | 9,770 | 25,808 | 19,955 | ||||||||
| Occupancy | 1,954 | 1,828 | 3,791 | 3,613 | ||||||||
| FDIC insurance premium | 353 | 329 | 643 | 656 | ||||||||
| Financial institutions tax | 535 | 447 | 1,014 | 893 | ||||||||
| Data processing | 2,019 | 1,641 | 3,958 | 3,101 | ||||||||
| Amortization of intangibles | 334 | 147 | 567 | 304 | ||||||||
| Other non-interest expense | 3,962 | 3,185 | 7,991 | 6,099 | ||||||||
| Total Non-interest Expense | 20,630 | 17,347 | 43,772 | 34,621 | ||||||||
| Income before income taxes | 12,024 | 10,571 | 21,022 | 20,757 | ||||||||
| Income taxes | 3,677 | 3,307 | 7,534 | 6,324 | ||||||||
| Net Income | $ | 8,347 | $ | 7,264 | $ | 13,488 | $ | 14,433 | ||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.82 | $ | 0.81 | $ | 1.38 | $ | 1.61 | ||||
| Diluted | $ | 0.82 | $ | 0.80 | $ | 1.37 | $ | 1.59 | ||||
| Average Shares Outstanding: | ||||||||||||
| Basic | 10,147 | 8,968 | 9,793 | 8,981 | ||||||||
| Diluted | 10,206 | 9,036 | 9,850 | 9,050 | ||||||||
| Financial Summary and Comparison (Unaudited) | ||||||||||||||||||||||||
| First Defiance Financial Corp. | ||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2017 | 2016 | % change | 2017 | 2016 | % change | ||||||||||||||||||
| Summary of Operations | ||||||||||||||||||||||||
| Tax-equivalent interest income (1) | $ | 27,944 | $ | 21,940 | 27.4 | % | $ | 52,450 | $ | 43,545 | 20.5 | % | ||||||||||||
| Interest expense | 2,826 | 2,084 | 35.6 | 5,217 | 4,026 | 29.6 | ||||||||||||||||||
| Tax-equivalent net interest income (1) | 25,118 | 19,856 | 26.5 | 47,233 | 39,519 | 19.5 | ||||||||||||||||||
| Provision for loan losses | 2,118 | 53 | NM | 2,172 | 417 | NM | ||||||||||||||||||
| Tax-equivalent NII after provision for loan loss (1) | 23,000 | 19,803 | 16.1 | 45,061 | 39,102 | 15.2 | ||||||||||||||||||
| Investment Securities gains | 267 | 227 | NM | 267 | 358 | NM | ||||||||||||||||||
| Non-interest income (excluding securities gains/losses) | 9,873 | 8,348 | 18.3 | 20,422 | 16,853 | 21.2 | ||||||||||||||||||
| Non-interest expense | 20,630 | 17,347 | 18.9 | 43,772 | 34,621 | 26.4 | ||||||||||||||||||
| Income taxes | 3,677 | 3,307 | 11.2 | 7,534 | 6,324 | 19.1 | ||||||||||||||||||
| Net Income | 8,347 | 7,264 | 14.9 | 13,488 | 14,433 | (6.5 | ) | |||||||||||||||||
| Tax equivalent adjustment (1) | 486 | 460 | 5.7 | 956 | 935 | 2.2 | ||||||||||||||||||
| At Period End | ||||||||||||||||||||||||
| Assets | 2,889,941 | 2,409,599 | 19.9 | |||||||||||||||||||||
| Earning assets | 2,596,674 | 2,200,517 | 18.0 | |||||||||||||||||||||
| Loans | 2,254,435 | 1,861,403 | 21.1 | |||||||||||||||||||||
| Allowance for loan losses | 25,915 | 25,948 | (0.1 | ) | ||||||||||||||||||||
| Deposits | 2,326,702 | 1,920,270 | 21.2 | |||||||||||||||||||||
| Stockholders’ equity | 361,430 | 286,616 | 26.1 | |||||||||||||||||||||
| Average Balances | ||||||||||||||||||||||||
| Assets | 2,908,483 | 2,391,064 | 21.6 | 2,765,443 | 2,352,634 | 17.5 | ||||||||||||||||||
| Earning assets | 2,591,397 | 2,162,574 | 19.8 | 2,473,471 | 2,125,573 | 16.4 | ||||||||||||||||||
| Loans | 2,238,061 | 1,828,984 | 22.4 | 2,132,064 | 1,812,592 | 17.6 | ||||||||||||||||||
| Deposits and interest-bearing liabilities | 2,516,024 | 2,079,442 | 21.0 | 2,395,874 | 2,042,429 | 17.3 | ||||||||||||||||||
| Deposits | 2,346,336 | 1,903,139 | 23.3 | 2,227,986 | 1,869,242 | 19.2 | ||||||||||||||||||
| Stockholders’ equity | 357,523 | 282,573 | 26.5 | 335,983 | 280,812 | 19.6 | ||||||||||||||||||
| Stockholders’ equity / assets | 12.29 | % | 11.82 | % | 4.0 | 12.15 | % | 11.94 | % | 1.8 | ||||||||||||||
| Per Common Share Data | ||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||
| Basic | $ | 0.82 | $ | 0.81 | 1.2 | $ | 1.38 | $ | 1.61 | (14.3 | ) | |||||||||||||
| Diluted | 0.82 | 0.80 | 2.5 | 1.37 | 1.59 | (13.8 | ) | |||||||||||||||||
| Dividends | 0.25 | 0.22 | 13.6 | 0.50 | 0.44 | 13.6 | ||||||||||||||||||
| Market Value: | ||||||||||||||||||||||||
| High | $ | 56.90 | $ | 41.21 | 38.1 | $ | 56.90 | $ | 41.21 | 38.1 | ||||||||||||||
| Low | 48.78 | 37.53 | 30.0 | 46.27 | 34.80 | 33.0 | ||||||||||||||||||
| Close | 52.68 | 38.85 | 35.6 | 52.68 | 38.85 | 35.6 | ||||||||||||||||||
| Common Book Value | 35.61 | 31.95 | 11.5 | 35.61 | 31.95 | 11.5 | ||||||||||||||||||
| Tangible Common Book Value (1) | 25.32 | 24.89 | 1.7 | 25.32 | 24.89 | 1.7 | ||||||||||||||||||
| Shares outstanding, end of period (000) | 10,149 | 8,971 | 13.1 | 10,149 | 8,971 | 13.1 | ||||||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||||||
| Tax-equivalent net interest margin (2) | 3.89 | % | 3.71 | % | 5.0 | 3.86 | % | 3.75 | % | 2.7 | ||||||||||||||
| Return on average assets | 1.15 | % | 1.22 | % | (5.8 | ) | 0.98 | % | 1.23 | % | (20.3 | ) | ||||||||||||
| Return on average equity | 9.36 | % | 10.34 | % | (9.4 | ) | 8.10 | % | 10.34 | % | (21.7 | ) | ||||||||||||
| Efficiency ratio (3) | 58.96 | % | 61.51 | % | (4.1 | ) | 64.70 | % | 61.42 | % | 5.3 | |||||||||||||
| Effective tax rate | 30.58 | % | 31.28 | % | (2.2 | ) | 35.84 | % | 30.47 | % | 17.6 | |||||||||||||
| Dividend payout ratio (basic) | 30.49 | % | 27.16 | % | 12.3 | 36.23 | % | 27.33 | % | 32.6 | ||||||||||||||
|
(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 | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (dollars in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Gain from sale of mortgage loans | $ | 1,293 | $ | 1,426 | $ | 2,377 | $ | 2,420 | ||||||||
| Mortgage loan servicing revenue (expense): | ||||||||||||||||
| Mortgage loan servicing revenue | 924 | 876 | 1,858 | 1,753 | ||||||||||||
| Amortization of mortgage servicing rights | (403 | ) | (434 | ) | (715 | ) | (745 | ) | ||||||||
| Mortgage servicing rights valuation adjustments | 16 | (104 | ) | 48 | (125 | ) | ||||||||||
| 537 | 338 | 1,191 | 883 | |||||||||||||
| Total revenue from sale and servicing of mortgage loans | $ | 1,830 | $ | 1,764 | $ | 3,568 | $ | 3,303 | ||||||||
| Yield Analysis | |||||||||||||||||||||
| First Defiance Financial Corp. | |||||||||||||||||||||
| Three Months Ended June 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 | $ | 2,238,061 | $ | 25,368 | 4.55% | $ | 1,828,984 | $ | 19,716 | 4.34% | |||||||||||
| Securities | 259,619 | 2,188 | 3.42% |
(3) |
224,494 | 1,953 | 3.62% |
(3) |
|||||||||||||
| Interest Bearing Deposits | 77,725 | 201 | 1.04% | 95,296 | 134 | 0.57% | |||||||||||||||
| FHLB stock | 15,992 | 187 | 4.69% | 13,800 | 137 | 3.99% | |||||||||||||||
| Total interest-earning assets | 2,591,397 | 27,944 | 4.33% | 2,162,574 | 21,940 | 4.10% | |||||||||||||||
| Non-interest-earning assets | 317,086 | 228,490 | |||||||||||||||||||
| Total assets | $ | 2,908,483 | $ | 2,391,064 | |||||||||||||||||
| Deposits and Interest-bearing liabilities: | |||||||||||||||||||||
| Interest bearing deposits | $ | 1,785,895 | $ | 2,170 | 0.49% | $ | 1,463,086 | $ | 1,545 | 0.42% | |||||||||||
| FHLB advances and other | 104,923 | 414 | 1.58% | 84,506 | 321 | 1.53% | |||||||||||||||
| Subordinated debentures | 36,156 | 229 | 2.54% | 36,141 | 182 | 2.03% | |||||||||||||||
| Notes payable | 28,609 | 13 | 0.18% | 55,656 | 36 | 0.26% | |||||||||||||||
| Total interest-bearing liabilities | 1,955,583 | 2,826 | 0.58% | 1,639,389 | 2,084 | 0.51% | |||||||||||||||
| Non-interest bearing deposits | 560,441 | - | - | 440,053 | - | - | |||||||||||||||
| Total including non-interest-bearing demand deposits | 2,516,024 | 2,826 | 0.45% | 2,079,442 | 2,084 | 0.40% | |||||||||||||||
| Other non-interest-bearing liabilities | 34,936 | 29,049 | |||||||||||||||||||
| Total liabilities | 2,550,960 | 2,108,491 | |||||||||||||||||||
| Stockholders' equity | 357,523 | 282,573 | |||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,908,483 | $ | 2,391,064 | |||||||||||||||||
| Net interest income; interest rate spread | $ | 25,118 | 3.75% | $ | 19,856 | 3.59% | |||||||||||||||
| Net interest margin (4) | 3.89% | 3.71% | |||||||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 133% | 132% | |||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||||
| Average | Yield | Average | Yield | ||||||||||||||||||
| Balance | Interest(1) | Rate | Balance | Interest(1) | Rate | ||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||
| Loans receivable | $ | 2,132,064 | $ | 47,390 | 4.48% | $ | 1,812,592 | $ | 39,079 | 4.34% | |||||||||||
| Securities | 257,230 | 4,361 | 3.46% | (3) | 229,154 | 4,007 | 3.64% |
(3) |
|||||||||||||
| Interest Bearing Deposits | 68,904 | 346 | 1.01% | 70,026 | 183 | 0.53% | |||||||||||||||
| FHLB stock | 15,273 | 353 | 4.66% | 13,801 | 276 | 4.02% | |||||||||||||||
| Total interest-earning assets | 2,473,471 | 52,450 | 4.28% | 2,125,573 | 43,545 | 4.13% | |||||||||||||||
| Non-interest-earning assets | 291,972 | 227,061 | |||||||||||||||||||
| Total assets | $ | 2,765,443 | $ | 2,352,634 | |||||||||||||||||
| Deposits and Interest-bearing liabilities: | |||||||||||||||||||||
| Interest bearing deposits | $ | 1,706,318 | $ | 3,966 | 0.47% | $ | 1,441,783 | $ | 2,978 | 0.42% | |||||||||||
| FHLB advances and other | 104,600 | 780 | 1.50% | 81,598 | 618 | 1.52% | |||||||||||||||
| Subordinated debentures | 36,153 | 443 | 2.46% | 36,140 | 357 | 2.00% | |||||||||||||||
| Notes payable | 27,135 | 28 | 0.21% | 55,449 | 73 | 0.27% | |||||||||||||||
| Total interest-bearing liabilities | 1,874,206 | 5,217 | 0.56% | 1,614,970 | 4,026 | 0.50% | |||||||||||||||
| Non-interest bearing deposits | 521,668 | - | - | 427,459 | - | - | |||||||||||||||
| Total including non-interest-bearing demand deposits | 2,395,874 | 5,217 | 0.44% | 2,042,429 | 4,026 | 0.40% | |||||||||||||||
| Other non-interest-bearing liabilities | 33,586 | 29,393 | |||||||||||||||||||
| Total liabilities | 2,429,460 | 2,071,822 | |||||||||||||||||||
| Stockholders' equity | 335,983 | 280,812 | |||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,765,443 | $ | 2,352,634 | |||||||||||||||||
| Net interest income; interest rate spread | $ | 47,233 | 3.72% | $ | 39,519 | 3.63% | |||||||||||||||
| Net interest margin (4) | 3.86% | 3.75% | |||||||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 132% | 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) | 2nd Qtr 2017 | 1st Qtr 2017 | 4th Qtr 2016 | 3rd Qtr 2016 | 2nd Qtr 2016 | |||||||||||||||
| Summary of Operations | ||||||||||||||||||||
| Tax-equivalent interest income (1) | $ | 27,944 | $ | 24,505 | $ | 23,219 | $ | 22,449 | $ | 21,940 | ||||||||||
| Interest expense | 2,826 | 2,391 | 2,231 | 2,183 | 2,084 | |||||||||||||||
| Tax-equivalent net interest income (1) | 25,118 | 22,114 | 20,988 | 20,266 | 19,856 | |||||||||||||||
| Provision for loan losses | 2,118 | 55 | (149 | ) | 15 | 53 | ||||||||||||||
| Tax-equivalent NII after provision for loan losses (1) | 23,000 | 22,059 | 21,137 | 20,251 | 19,803 | |||||||||||||||
| Investment securities gains, net of impairment | 267 | - | - | 151 | 227 | |||||||||||||||
| Non-interest income (excluding securities gains/losses) | 9,873 | 10,549 | 8,293 | 8,375 | 8,348 | |||||||||||||||
| Non-interest expense | 20,630 | 23,142 | 18,180 | 18,292 | 17,347 | |||||||||||||||
| Income taxes | 3,677 | 3,857 | 3,436 | 2,994 | 3,307 | |||||||||||||||
| Net income | 8,347 | 5,140 | 7,365 | 7,045 | 7,264 | |||||||||||||||
| Tax equivalent adjustment (1) | 486 | 469 | 449 | 446 | 460 | |||||||||||||||
| At Period End | ||||||||||||||||||||
| Total assets | $ | 2,889,941 | $ | 2,928,697 | $ | 2,477,151 | $ | 2,450,040 | $ | 2,409,599 | ||||||||||
| Earning assets | 2,596,674 | 2,639,325 | 2,261,068 | 2,240,747 | 2,200,517 | |||||||||||||||
| Loans | 2,254,435 | 2,238,006 | 1,940,487 | 1,925,694 | 1,861,403 | |||||||||||||||
| Allowance for loan losses | 25,915 | 25,749 | 25,884 | 25,923 | 25,948 | |||||||||||||||
| Deposits | 2,326,702 | 2,373,789 | 1,981,628 | 1,927,686 | 1,920,270 | |||||||||||||||
| Stockholders’ equity | 361,430 | 354,191 | 293,018 | 292,138 | 286,616 | |||||||||||||||
| Stockholders’ equity / assets | 12.51 | % | 12.09 | % | 11.83 | % | 11.92 | % | 11.89 | % | ||||||||||
| Goodwill | 98,065 | 90,768 | 61,798 | 61,798 | 61,798 | |||||||||||||||
| Average Balances | ||||||||||||||||||||
| Total assets | $ | 2,908,483 | $ | 2,622,402 | $ | 2,458,952 | $ | 2,425,535 | $ | 2,391,064 | ||||||||||
| Earning assets | 2,591,397 | 2,355,544 | 2,226,868 | 2,194,170 | 2,162,574 | |||||||||||||||
| Loans | 2,238,061 | 2,026,067 | 1,908,731 | 1,879,760 | 1,828,984 | |||||||||||||||
| Deposits and interest-bearing liabilities | 2,516,024 | 2,275,724 | 2,133,868 | 2,103,054 | 2,079,442 | |||||||||||||||
| Deposits | 2,346,336 | 2,109,637 | 1,954,631 | 1,929,368 | 1,903,139 | |||||||||||||||
| Stockholders’ equity | 357,523 | 314,442 | 292,301 | 288,609 | 282,573 | |||||||||||||||
| Stockholders’ equity / assets | 12.29 | % | 11.99 | % | 11.89 | % | 11.90 | % | 11.82 | % | ||||||||||
| Per Common Share Data | ||||||||||||||||||||
| Net Income: | ||||||||||||||||||||
| Basic | $ | 0.82 | $ | 0.54 | $ | 0.82 | $ | 0.78 | $ | 0.81 | ||||||||||
| Diluted | 0.82 | 0.54 | 0.81 | 0.78 | 0.80 | |||||||||||||||
| Dividends | 0.25 | 0.25 | 0.22 | 0.22 | 0.22 | |||||||||||||||
| Market Value: | ||||||||||||||||||||
| High | $ | 56.90 | $ | 51.15 | $ | 52.31 | $ | 46.83 | $ | 41.21 | ||||||||||
| Low | 48.78 | 46.27 | 36.91 | 35.90 | 37.53 | |||||||||||||||
| Close | 52.68 | 49.51 | 50.74 | 44.64 | 38.85 | |||||||||||||||
| Common Book Value | 35.61 | 34.92 | 32.62 | 32.53 | 31.95 | |||||||||||||||
| Shares outstanding, end of period (in thousands) | 10,149 | 10,143 | 8,983 | 8,980 | 8,971 | |||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||
| Tax-equivalent net interest margin (1) | 3.89 | % | 3.81 | % | 3.76 | % | 3.69 | % | 3.71 | % | ||||||||||
| Return on average assets | 1.15 | % | 0.79 | % | 1.19 | % | 1.16 | % | 1.22 | % | ||||||||||
| Return on average equity | 9.36 | % | 6.63 | % | 10.02 | % | 9.71 | % | 10.34 | % | ||||||||||
| Efficiency ratio (2) | 58.96 | % | 70.85 | % | 62.09 | % | 63.87 | % | 61.51 | % | ||||||||||
| Effective tax rate | 30.58 | % | 42.87 | % | 31.81 | % | 29.82 | % | 31.28 | % | ||||||||||
| Common dividend payout ratio (basic) | 30.49 | % | 46.30 | % | 26.83 | % | 28.21 | % | 27.16 | % | ||||||||||
|
(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) | 2nd Qtr 2017 | 1st Qtr 2017 | 4th Qtr 2016 | 3rd Qtr 2016 | 2nd Qtr 2016 | |||||||||||||||
| Loan Portfolio Composition | ||||||||||||||||||||
| One to four family residential real estate | $ | 276,578 | $ | 276,931 | $ | 207,550 | $ | 209,097 | $ | 206,861 | ||||||||||
| Construction | 234,688 | 199,724 | 182,886 | 177,075 | 161,282 | |||||||||||||||
| Commercial real estate | 1,182,087 | 1,193,906 | 1,040,562 | 1,043,820 | 1,001,315 | |||||||||||||||
| Commercial | 515,004 | 504,366 | 469,055 | 456,099 | 428,599 | |||||||||||||||
| Consumer finance | 28,860 | 27,696 | 16,680 | 17,251 | 16,690 | |||||||||||||||
| Home equity and improvement | 130,429 | 132,965 | 118,429 | 118,165 | 116,685 | |||||||||||||||
| Total loans | 2,367,646 | 2,335,588 | 2,035,162 | 2,021,507 | 1,931,432 | |||||||||||||||
| Less: | ||||||||||||||||||||
| Undisbursed loan funds | 112,000 | 95,460 | 93,355 | 94,552 | 68,850 | |||||||||||||||
| Deferred loan origination fees | 1,211 | 1,264 | 1,320 | 1,261 | 1,179 | |||||||||||||||
| Allowance for loan loss | 25,915 | 25,749 | 25,884 | 25,923 | 25,948 | |||||||||||||||
| Net Loans | $ | 2,228,520 | $ | 2,213,115 | $ | 1,914,603 | $ | 1,899,771 | $ | 1,835,455 | ||||||||||
| Allowance for loan loss activity | ||||||||||||||||||||
| Beginning allowance | $ | 25,749 | $ | 25,884 | $ | 25,923 | $ | 25,948 | $ | 25,668 | ||||||||||
| Provision for loan losses | 2,118 | 55 | (149 | ) | 15 | 53 | ||||||||||||||
| Credit loss charge-offs: | ||||||||||||||||||||
| One to four family residential real estate | - | 49 | 147 | 111 | 37 | |||||||||||||||
| Commercial real estate | 110 | 290 | 0 | 79 | 0 | |||||||||||||||
| Commercial | 2,027 | - | 234 | 26 | 18 | |||||||||||||||
| Consumer finance | 21 | 71 | 53 | 24 | 18 | |||||||||||||||
| Home equity and improvement | 100 | 54 | 98 | 74 | 66 | |||||||||||||||
| Total charge-offs | 2,258 | 464 | 532 | 314 | 139 | |||||||||||||||
| Total recoveries | 306 | 274 | 642 | 274 | 366 | |||||||||||||||
| Net charge-offs (recoveries) | 1,952 | 190 | (110 | ) | 40 | (227 | ) | |||||||||||||
| Ending allowance | $ |
25,915 |
$ | 25,749 | $ | 25,884 | $ | 25,923 | $ | 25,948 | ||||||||||
| Credit Quality | ||||||||||||||||||||
| Total non-performing loans (1) | $ | 30,359 | $ | 15,057 | $ | 14,348 | $ | 18,198 | $ | 16,423 | ||||||||||
| Real estate owned (REO) | 672 | 705 | 455 | 704 | 1,079 | |||||||||||||||
| Total non-performing assets (2) | $ | 31,031 | $ | 15,762 | $ | 14,803 | $ | 18,902 | $ | 17,502 | ||||||||||
| Net charge-offs (recoveries) | 1,952 | 190 | (110 | ) | 40 | (227 | ) | |||||||||||||
| Restructured loans, accruing (3) | 10,521 | 9,814 | 10,544 | 9,113 | 9,648 | |||||||||||||||
| Allowance for loan losses / loans | 1.15 | % | 1.15 | % | 1.33 | % | 1.35 | % | 1.39 | % | ||||||||||
| Allowance for loan losses / non-performing assets | 83.51 | % | 163.36 | % | 174.86 | % | 137.14 | % | 148.26 | % | ||||||||||
| Allowance for loan losses / non-performing loans | 85.36 | % | 171.01 | % | 180.40 | % | 142.45 | % | 158.00 | % | ||||||||||
| Non-performing assets / loans plus REO | 1.38 | % | 0.70 | % | 0.76 | % | 0.98 | % | 0.94 | % | ||||||||||
| Non-performing assets / total assets | 1.07 | % | 0.54 | % | 0.60 | % | 0.77 | % | 0.73 | % | ||||||||||
| Net charge-offs / average loans (annualized) | 0.35 | % | 0.04 | % | -0.02 | % | 0.01 | % | -0.05 | % | ||||||||||
| Deposit Balances | ||||||||||||||||||||
| Non-interest-bearing demand deposits | $ | 520,778 | $ | 579,943 | $ | 487,663 | $ | 443,321 | $ | 442,811 | ||||||||||
| Interest-bearing demand deposits and money market | 967,834 | 973,459 | 816,665 | 810,393 | 805,550 | |||||||||||||||
| Savings deposits | 288,643 | 288,498 | 243,369 | 241,016 | 240,316 | |||||||||||||||
| Retail time deposits less than $250,000 | 499,298 | 490,953 | 400,080 | 399,749 | 399,494 | |||||||||||||||
| Retail time deposits greater than $250,000 | 50,149 | 40,936 | 33,851 | 33,207 | 32,099 | |||||||||||||||
| Total deposits | $ | 2,326,702 | $ | 2,373,789 | $ | 1,981,628 | $ | 1,927,686 | $ | 1,920,270 | ||||||||||
|
(1) |
Non-performing loans consist of non-accrual loans. |
|
|
(2) |
Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof. |
|
|
(3) |
Accruing restructured loans are loans with known credit problems that are not contractually past due and therefore are not included in non-performing loans. |
|
| Loan Delinquency Information | ||||||||||||
| First Defiance Financial Corp. | ||||||||||||
| 30 to 89 days | Non Accrual | |||||||||||
| (dollars in thousands) | Total Balance | Current | past due | Loans | ||||||||
| June 30, 2017 | ||||||||||||
| One to four family residential real estate | $ | 276,578 | $ | 270,729 | $ | 2,710 | $ | 3,139 | ||||
| Construction | 234,688 | 234,445 | - | 243 | ||||||||
| Commercial real estate | 1,182,087 | 1,161,810 | 1,370 | 18,907 | ||||||||
| Commercial | 515,004 | 506,996 | 545 | 7,463 | ||||||||
| Consumer finance | 28,860 | 28,594 | 215 | 51 | ||||||||
| Home equity and improvement | 130,429 | 128,668 | 1,205 | 556 | ||||||||
| Total loans | $ | 2,367,646 | $ | 2,331,242 | $ | 6,045 | $ | 30,359 | ||||
| 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 | ||||
| June 30, 2016 | ||||||||||||
| One to four family residential real estate | $ | 206,861 | $ | 203,534 | $ | 619 | $ | 2,708 | ||||
| Construction | 161,282 | 161,282 | - | - | ||||||||
| Commercial real estate | 1,001,315 | 988,342 | 2,174 | 10,799 | ||||||||
| Commercial | 428,599 | 424,107 | 2,269 | 2,223 | ||||||||
| Consumer finance | 16,690 | 16,629 | 45 | 16 | ||||||||
| Home equity and improvement | 116,685 | 115,376 | 632 | 677 | ||||||||
| Total loans | $ | 1,931,432 | $ | 1,909,270 | $ | 5,739 | $ | 16,423 | ||||
