DEFIANCE, Ohio--(BUSINESS WIRE)--First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for the third quarter ended September 30, 2018, totaled $11.3 million, or $0.55 per diluted common share compared to $9.4 million or $0.46 per diluted common share for the quarter ended September 30, 2017.
“Our third quarter results reflect the continued high financial performance of our company,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “Our ability to grow our balance sheet and maintain strong profitability delivered excellent results for our shareholders, with earnings per share up 19.6% from the third quarter last year.”
Net Interest Income up Compared to Third Quarter 2017
Net interest income of $27.5 million in the third quarter of 2018 was up from $25.0 million in the third quarter of 2017. The increase was primarily due to the growth in earning assets supplemented by expansion in the net interest margin versus the third quarter last year. The net interest margin was 4.00% for the third quarter of 2018, up from 3.95% in the second quarter of 2018, and up from 3.91% in the third quarter of 2017. Yield on interest earning assets increased by 25 basis points, to 4.63% in the third quarter of 2018 from 4.38% in the third quarter of 2017. The cost of interest-bearing liabilities increased by 24 basis points in the third quarter of 2018 to 0.85% from 0.61% in the third quarter of 2017.
“Our solid growth in loans and core deposits continued to fuel our net interest margin and generate strong growth in net interest income,” said Hileman. “Commercial loan demand was particularly robust and led to total loan growth of $71.0 million, or 11.9% annualized, while deposits grew $35.3 million, or 5.7% annualized. This growth combined with a healthy net interest margin for the quarter produced a strong increase in our net interest income, which is up 10.1% over the third quarter last year.”
Non-Interest Income up from Third Quarter 2017
First Defiance’s non-interest income for the third quarter of 2018 was $9.9 million compared with $9.5 million in the third quarter of 2017. The third quarter of 2018 included gains of $76,000 from the sale of securities compared to gains of $158,000 in the third quarter of 2017.
Mortgage banking income was $1.9 million in the third quarter of 2018, up from $1.7 million in the third quarter of 2017. Mortgage originations totaled $74.0 million in the third quarter of 2018 compared to $71.8 million in the same quarter last year. As a result of the higher volumes, gains from the sale of mortgage loans increased in the third quarter of 2018 to $1.3 million from $1.2 million in the third quarter of 2017. Mortgage loan servicing revenue was $929,000 in the third quarter of 2018, up from $911,000 in the third quarter of 2017 and amortization of mortgage servicing rights declined to $340,000 from $386,000 in the third quarter last year.
For the third quarter of 2018, commissions from the sale of insurance products were $3.3 million, up from $3.1 million in the third quarter of 2017. Service fees and other charges were $3.3 million in the third quarter of 2018, up from $3.2 million in the third quarter of 2017. Trust income was $514,000 in the third quarter of 2018, up from $486,000 in the third quarter of 2017.
“Our key business lines drove our 5.5% growth in non-interest income, excluding securities gains, over the third quarter last year,” said Hileman. “When compared to the same period last year, mortgage banking revenues grew 10.5%, insurance commissions were up 5.6% and trust revenues rose 5.8%.”
Non-Interest Expenses up from Third Quarter 2017
Total non-interest expense was $22.3 million in the third quarter of 2018, an increase from $20.4 million in the third quarter of 2017. Compensation and benefits increased to $12.9 million in the third quarter of 2018, compared to $11.8 million in the third quarter of 2017. Occupancy expense and data processing expense were both $2.2 million in the third quarter of 2018, up from $2.0 million and $1.9 million, respectively, in the third quarter of 2017. Other non-interest expense of $4.0 million in the third quarter of 2018 was up from $3.7 million in the third quarter of 2017.
Credit Quality
Non-performing loans totaled $20.9 million at September 30, 2018, a decrease from $29.2 million at September 30, 2017. In addition, First Defiance had $1.7 million of real estate owned at September 30, 2018, compared to $532,000 at September 30, 2017. Accruing troubled debt restructured loans were $12.6 million at September 30, 2018, compared with $13.0 million at September 30, 2017.
The third quarter 2018 results include net charge-offs of $1.1 million and a provision for loan losses of $1.4 million compared with net charge-offs of $36,000 and a provision of $462,000 for the same period in 2017.
The allowance for loan loss as a percentage of total loans was 1.13% at September 30, 2018, compared with 1.15% at June 30, 2018, and 1.16% at September 30, 2017.
“Our credit quality metrics remained strong and steady in the third quarter and showed improvement from a year ago,” said Hileman. “Total non-performing assets including troubled debt restructurings declined 17.6% from last year. Our allowance for loan losses coverage of nonaccrual loans was 132% at the end of the third quarter.”
Year-To-Date Results
For the nine-month period ended September 30, 2018, net income totaled $34.2 million, or $1.67 per diluted common share, compared to $22.9 million, or $1.15 per diluted common share for the nine months ended September 30, 2017. The first nine months of 2017 included approximately seven months of operations of the Commercial Savings Bank (“CSB”) acquisition completed on February 24, 2017, and six months of operations from Corporate One acquired on April 1, 2017. In comparison, the first nine months of 2018 results fully include the operations from both CSB and Corporate One. In addition, the first nine 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 $79.8 million for the first nine months of 2018 compared with $71.3 million in the first nine months of 2017. Average interest-earning assets increased to $2.71 billion in the first nine months of 2018 compared to $2.51 billion in the first nine months of 2017. Net interest margin for the first nine months of 2018 was 3.97%, up 9 basis points from the 3.88% margin reported in the nine month period ended September 30, 2017.
The provision for loan losses in the first nine months of 2018 was $704,000 compared to $2.6 million recorded during the first nine months of 2017.
Non-interest income for the first nine months of 2018 was $30.8 million compared to $30.2 million during the same period of 2017. The first nine months of 2017 included 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 $9.8 million for the first nine months of 2018, up from $9.1 million during the same period of 2017. Mortgage banking income was $5.6 million for the first nine months of 2018 compared with $5.3 million during the same period of 2017. Insurance commissions rose to $11.0 million for the first nine months of 2018 compared with $9.8 million for the same period of 2017. Non-interest income for the first nine months of 2018 included $76,000 of gains from the sale of securities compared with securities gains of $425,000 during the same period of 2017.
Non-interest expense was $68.2 million for the first nine months of 2018, up from $64.2 million for the same period of 2017. Compensation and benefits expense was $39.0 million for the first nine months of 2018 compared with $37.6 million during the same period of 2017. Expenses also included increases in occupancy of $500,000, data processing of $517,000 and other expenses of $1.5 million.
Total Assets at $3.10 Billion
Total assets at September 30, 2018, were $3.10 billion compared to $2.99 billion at December 31, 2017, and $2.93 billion at September 30, 2017.
Net loans receivable (excluding loans held for sale) were $2.43 billion at September 30, 2018, compared to $2.32 billion at December 31, 2017, and $2.25 billion at September 30, 2017. Also, at September 30, 2018, goodwill and other intangible assets totaled $103.3 million compared to $104.3 million at December 31, 2017, and $104.4 million at September 30, 2017. Total deposits at September 30, 2018, were $2.52 billion compared with $2.44 billion at December 31, 2017, and $2.36 billion at September 30, 2017.
Total stockholders’ equity was $393.5 million at September 30, 2018, compared to $373.3 million at December 31, 2017, and $367.9 million at September 30, 2017.
Dividend to be Paid November 16
The Board of Directors declared a quarterly cash dividend of $0.17 per common share payable November 16, 2018, to shareholders of record at the close of business on November 9, 2018. The dividend represents an annual dividend of 2.52 percent based on the First Defiance common stock closing price on October 12, 2018. First Defiance has approximately 20,401,460 common shares outstanding.
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, October 16, 2018, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. In addition, a live webcast may be accessed at https://services.choruscall.com/links/fdef181016.html.
The replay of the conference call webcast will be available at www.fdef.com until October 16, 2019, at 9:00 a.m. ET.
First Defiance Financial Corp.
First Defiance Financial Corp. (NASDAQ:FDEF), headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance Group. First Federal Bank operates 44 full-service branches and numerous ATM locations in northwest and central Ohio, southeast Michigan and northeast Indiana and a loan production office in Ann Arbor, Michigan. First Insurance Group is a full-service insurance agency with nine offices throughout northwest Ohio.
For more information, visit the company’s website at www.fdef.com.
-Financial Statements and Highlights Follow-
Safe Harbor Statement
This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions, the nature, extent and timing of governmental actions and reforms, future movements of interest rates, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a changing interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell real estate owned properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which First Defiance and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2017. 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, 2018 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) | 2018 | 2017 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Cash and amounts due from depository institutions | $ | 55,526 | $ | 58,693 | ||||
| Interest-bearing deposits | 44,000 | 55,000 | ||||||
| 99,526 | 113,693 | |||||||
| Securities | ||||||||
| Available-for sale, carried at fair value | 282,962 | 260,650 | ||||||
| Held-to-maturity, carried at amortized cost | 603 | 648 | ||||||
| 283,565 | 261,298 | |||||||
| Loans | 2,456,357 | 2,348,713 | ||||||
| Allowance for loan losses | (27,639 | ) | (26,683 | ) | ||||
| Loans, net | 2,428,718 | 2,322,030 | ||||||
| Loans held for sale | 12,485 | 10,435 | ||||||
| Mortgage servicing rights | 10,054 | 9,808 | ||||||
| Accrued interest receivable | 11,258 | 8,706 | ||||||
| Federal Home Loan Bank stock | 14,217 | 15,992 | ||||||
| Bank Owned Life Insurance | 67,259 | 66,230 | ||||||
| Office properties and equipment | 40,413 | 40,217 | ||||||
| Real estate and other assets held for sale | 1,676 | 1,532 | ||||||
| Goodwill | 98,569 | 98,569 | ||||||
| Core deposit and other intangibles | 4,705 | 5,703 | ||||||
| Deferred taxes | 1,353 | 231 | ||||||
| Other assets | 24,295 | 38,959 | ||||||
| Total Assets | $ | 3,098,093 | $ | 2,993,403 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Non-interest-bearing deposits | $ | 556,316 | $ | 571,360 | ||||
| Interest-bearing deposits | 1,968,115 | 1,866,296 | ||||||
| Total deposits | 2,524,431 | 2,437,656 | ||||||
| Advances from Federal Home Loan Bank | 100,222 | 84,279 | ||||||
| Notes payable and other interest-bearing liabilities | 4,162 | 26,019 | ||||||
| Subordinated debentures | 36,083 | 36,083 | ||||||
| Advance payments by borrowers for tax and insurance | 4,561 | 2,925 | ||||||
| Other liabilities | 35,177 | 33,155 | ||||||
| Total Liabilities | 2,704,636 | 2,620,117 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock | - | - | ||||||
| Common stock, net | 127 | 127 | ||||||
| Additional paid-in-capital | 161,179 | 160,940 | ||||||
| Accumulated other comprehensive income (loss) | (4,921 | ) | 217 | |||||
| Retained earnings | 286,960 | 262,900 | ||||||
| Treasury stock, at cost | (49,888 | ) | (50,898 | ) | ||||
| Total stockholders’ equity | 393,457 | 373,286 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 3,098,093 | $ | 2,993,403 | ||||
| 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) | 2018 | 2017 | 2018 | 2017 | ||||||||
| Interest Income: | ||||||||||||
| Loans | $ | 29,371 | $ | 25,975 | $ | 83,557 | $ | 73,263 | ||||
| Investment securities | 2,077 | 1,688 | 5,967 | 5,195 | ||||||||
| Interest-bearing deposits | 275 | 209 | 945 | 555 | ||||||||
| FHLB stock dividends | 240 | 209 | 698 | 562 | ||||||||
| Total interest income | 31,963 | 28,081 | 91,167 | 79,575 | ||||||||
| Interest Expense: | ||||||||||||
| Deposits | 3,753 | 2,391 | 9,508 | 6,357 | ||||||||
| FHLB advances and other | 342 | 431 | 943 | 1,211 | ||||||||
| Subordinated debentures | 334 | 239 | 934 | 682 | ||||||||
| Notes Payable | 5 | 13 | 19 | 41 | ||||||||
| Total interest expense | 4,434 | 3,074 | 11,404 | 8,291 | ||||||||
| Net interest income | 27,529 | 25,007 | 79,763 | 71,284 | ||||||||
| Provision for loan losses | 1,376 | 462 | 704 | 2,635 | ||||||||
| Net interest income after provision for loan losses | 26,153 | 24,545 | 79,059 | 68,649 | ||||||||
| Non-interest Income: | ||||||||||||
| Service fees and other charges | 3,335 | 3,153 | 9,762 | 9,073 | ||||||||
| Mortgage banking income | 1,877 | 1,698 | 5,632 | 5,266 | ||||||||
| Gain on sale of non-mortgage loans | 33 | 82 | 300 | 172 | ||||||||
| Gain on sale of securities | 76 | 158 | 76 | 425 | ||||||||
| Insurance commissions | 3,254 | 3,082 | 11,024 | 9,834 | ||||||||
| Trust income | 514 | 486 | 1,588 | 1,400 | ||||||||
| Income from Bank Owned Life Insurance | 399 | 421 | 1,365 | 2,666 | ||||||||
| Other non-interest income | 434 | 415 | 1,092 | 1,348 | ||||||||
| Total Non-interest Income | 9,922 | 9,495 | 30,839 | 30,184 | ||||||||
| Non-interest Expense: | ||||||||||||
| Compensation and benefits | 12,882 | 11,780 | 39,016 | 37,588 | ||||||||
| Occupancy | 2,154 | 1,960 | 6,251 | 5,751 | ||||||||
| FDIC insurance premium | 255 | 330 | 817 | 973 | ||||||||
| Financial institutions tax | 531 | 404 | 1,593 | 1,418 | ||||||||
| Data processing | 2,161 | 1,874 | 6,349 | 5,832 | ||||||||
| Amortization of intangibles | 319 | 364 | 998 | 931 | ||||||||
| Other non-interest expense | 3,984 | 3,728 | 13,178 | 11,718 | ||||||||
| Total Non-interest Expense | 22,286 | 20,440 | 68,202 | 64,211 | ||||||||
| Income before income taxes | 13,789 | 13,600 | 41,696 | 34,622 | ||||||||
| Income taxes | 2,483 | 4,219 | 7,544 | 11,753 | ||||||||
| Net Income | $ | 11,306 | $ | 9,381 | $ | 34,152 | $ | 22,869 | ||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.55 | $ | 0.46 | $ | 1.68 | $ | 1.15 | ||||
| Diluted | $ | 0.55 | $ | 0.46 | $ | 1.67 | $ | 1.15 | ||||
| Average Shares Outstanding: | ||||||||||||
| Basic | 20,400 | 20,298 | 20,373 | 19,826 | ||||||||
| Diluted | 20,467 | 20,418 | 20,465 | 19,940 | ||||||||
| 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) | 2018 | 2017 | % change | 2018 | 2017 | % change | ||||||||||||||||||
| Summary of Operations | ||||||||||||||||||||||||
| Tax-equivalent interest income (2) | $ | 32,220 | $ | 28,557 | 12.8 | % | $ | 91,913 | $ | 81,007 | 13.5 | % | ||||||||||||
| Interest expense | 4,434 | 3,074 | 44.2 | 11,404 | 8,291 | 37.5 | ||||||||||||||||||
| Tax-equivalent net interest income (2) | 27,786 | 25,483 | 9.0 | 80,509 | 72,716 | 10.7 | ||||||||||||||||||
| Provision for loan losses | 1,376 | 462 | 197.8 | 704 | 2,635 | (73.3 | ) | |||||||||||||||||
| Tax-equivalent NII after provision for loan loss (2) | 26,410 | 25,021 | 5.6 | 79,805 | 70,081 | 13.9 | ||||||||||||||||||
| Investment securities gains | 76 | 158 | (51.9 | ) | 76 | 425 | (82.1 | ) | ||||||||||||||||
| Non-interest income (excluding securities gains/losses) | 9,846 | 9,337 | 5.5 | 30,763 | 29,759 | 3.4 | ||||||||||||||||||
| Non-interest expense | 22,286 | 20,440 | 9.0 | 68,202 | 64,211 | 6.2 | ||||||||||||||||||
| Income taxes | 2,483 | 4,219 | (41.1 | ) | 7,544 | 11,753 | (35.8 | ) | ||||||||||||||||
| Net Income | 11,306 | 9,381 | 20.5 | 34,152 | 22,869 | 49.3 | ||||||||||||||||||
| Tax equivalent adjustment (2) | 257 | 476 | (46.0 | ) | 746 | 1,432 | (47.9 | ) | ||||||||||||||||
| At Period End | ||||||||||||||||||||||||
| Assets | 3,098,093 | 2,935,030 | 5.6 | |||||||||||||||||||||
| Earning assets | 2,810,624 | 2,633,996 | 6.7 | |||||||||||||||||||||
| Loans | 2,456,357 | 2,276,042 | 7.9 | |||||||||||||||||||||
| Allowance for loan losses | 27,639 | 26,341 | 4.9 | |||||||||||||||||||||
| Deposits | 2,524,431 | 2,360,675 | 6.9 | |||||||||||||||||||||
| Stockholders’ equity | 393,457 | 367,924 | 6.9 | |||||||||||||||||||||
| Average Balances | ||||||||||||||||||||||||
| Assets | 3,059,225 | 2,906,795 | 5.2 | 3,018,632 | 2,812,560 | 7.3 | ||||||||||||||||||
| Earning assets | 2,754,561 | 2,590,463 | 6.3 | 2,710,998 | 2,511,469 | 7.9 | ||||||||||||||||||
| Loans | 2,403,932 | 2,251,071 | 6.8 | 2,352,514 | 2,171,733 | 8.3 | ||||||||||||||||||
| Deposits and interest-bearing liabilities | 2,633,054 | 2,507,805 | 5.0 | 2,599,540 | 2,433,185 | 6.8 | ||||||||||||||||||
| Deposits | 2,513,708 | 2,338,817 | 7.5 | 2,478,526 | 2,264,930 | 9.4 | ||||||||||||||||||
| Stockholders’ equity | 389,361 | 363,612 | 7.1 | 381,506 | 345,192 | 10.5 | ||||||||||||||||||
| Stockholders’ equity / assets | 12.73 | % | 12.51 | % | 1.7 | 12.64 | % | 12.27 | % | 3.0 | ||||||||||||||
| Per Common Share Data | ||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||
| Basic | $ | 0.55 | $ | 0.46 | 19.6 | $ | 1.68 | $ | 1.15 | 46.1 | ||||||||||||||
| Diluted | 0.55 | 0.46 | 19.6 | 1.67 | 1.15 | 45.9 | ||||||||||||||||||
| Dividends | 0.17 | 0.125 | 36.0 | 0.47 | 0.375 | 25.3 | ||||||||||||||||||
| Market Value: | ||||||||||||||||||||||||
| High | $ | 35.00 | $ | 27.00 | 29.7 | $ | 35.00 | $ | 28.45 | 23.0 | ||||||||||||||
| Low | 29.61 | 23.51 | 26.0 | 25.51 | 23.14 | 10.3 | ||||||||||||||||||
| Close | 30.11 | 26.25 | 14.7 | 30.11 | 26.25 | 14.7 | ||||||||||||||||||
| Common Book Value | 19.29 | 18.13 | 6.4 | 19.29 | 18.13 | 6.4 | ||||||||||||||||||
| Tangible Common Book Value (1) | 14.23 | 12.98 | 9.6 | 14.23 | 12.98 | 9.6 | ||||||||||||||||||
| Shares outstanding, end of period (000) | 20,396 | 20,298 | 0.5 | 20,396 | 20,298 | 0.5 | ||||||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||||||
| Tax-equivalent net interest margin (2) | 4.00 | % | 3.91 | % | 2.2 | 3.97 | % | 3.88 | % | 2.3 | ||||||||||||||
| Return on average assets | 1.47 | % | 1.28 | % | 14.5 | 1.51 | % | 1.09 | % | 39.1 | ||||||||||||||
| Return on average equity | 11.52 | % | 10.24 | % | 12.6 | 11.97 | % | 8.86 | % | 35.1 | ||||||||||||||
| Efficiency ratio (3) | 59.22 | % | 58.70 | % | 0.9 | 61.29 | % | 62.66 | % | (2.2 | ) | |||||||||||||
| Effective tax rate | 18.01 | % | 31.02 | % | (42.0 | ) | 18.09 | % | 33.95 | % | (46.7 | ) | ||||||||||||
| Dividend payout ratio (basic) | 30.91 | % | 27.17 | % | 13.7 | 27.98 | % | 32.47 | % | (13.8 | ) | |||||||||||||
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(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. |
|
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(2) |
Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 21% in 2018 and 35% in 2017. |
|
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(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. |
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NM |
Percentage change not meaningful |
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| 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) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Gain from sale of mortgage loans | $ | 1,280 | $ | 1,200 | $ | 3,744 | $ | 3,577 | ||||||||
| Mortgage loan servicing revenue (expense): | ||||||||||||||||
| Mortgage loan servicing revenue | 929 | 911 | 2,806 | 2,769 | ||||||||||||
| Amortization of mortgage servicing rights | (340 | ) | (386 | ) | (1,009 | ) | (1,101 | ) | ||||||||
| Mortgage servicing rights valuation adjustments | 8 | (27 | ) | 91 | 21 | |||||||||||
| 597 | 498 | 1,888 | 1,689 | |||||||||||||
| Total revenue from sale and servicing of mortgage loans | $ | 1,877 | $ | 1,698 | $ | 5,632 | $ | 5,266 | ||||||||
| Yield Analysis | ||||||||||||||||
| First Defiance Financial Corp. | ||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Average | Yield | Average | Yield | |||||||||||||
| Balance | Interest(1) | Rate(2) | Balance | Interest(1) | Rate(2) | |||||||||||
| Interest-earning assets: | ||||||||||||||||
| Loans receivable | $ 2,403,932 | $ 29,397 | 4.85% | $ 2,251,071 | $ 26,025 | 4.59% | ||||||||||
| Securities | 286,507 | 2,308 | 3.16% | (3) | 259,310 | 2,114 | 3.29% | (3) | ||||||||
| Interest Bearing Deposits | 49,734 | 275 | 2.19% | 64,090 | 209 | 1.29% | ||||||||||
| FHLB stock | 14,388 | 240 | 6.62% | 15,992 | 209 | 5.18% | ||||||||||
| Total interest-earning assets | 2,754,561 | 32,220 | 4.63% | 2,590,463 | 28,557 | 4.38% | ||||||||||
| Non-interest-earning assets | 304,664 | 316,332 | ||||||||||||||
| Total assets | $ 3,059,225 | $ 2,906,795 | ||||||||||||||
| Deposits and Interest-bearing liabilities: | ||||||||||||||||
| Interest bearing deposits | $ 1,955,518 | $ 3,753 | 0.76% | $ 1,818,670 | $ 2,391 | 0.52% | ||||||||||
| FHLB advances and other | 77,719 | 342 | 1.75% | 104,648 | 431 | 1.63% | ||||||||||
| Subordinated debentures | 36,196 | 334 | 3.66% | 36,158 | 239 | 2.62% | ||||||||||
| Notes payable | 5,431 | 5 | 0.37% | 28,182 | 13 | 0.18% | ||||||||||
| Total interest-bearing liabilities | 2,074,864 | 4,434 | 0.85% | 1,987,658 | 3,074 | 0.61% | ||||||||||
| Non-interest bearing deposits | 558,190 | - | - | 520,147 | - | - | ||||||||||
| Total including non-interest-bearing demand deposits | 2,633,054 | 4,434 | 0.67% | 2,507,805 | 3,074 | 0.49% | ||||||||||
| Other non-interest-bearing liabilities | 36,810 | 35,378 | ||||||||||||||
| Total liabilities | 2,669,864 | 2,543,183 | ||||||||||||||
| Stockholders' equity | 389,361 | 363,612 | ||||||||||||||
| Total liabilities and stockholders' equity | $ 3,059,225 | $ 2,906,795 | ||||||||||||||
| Net interest income; interest rate spread | $ 27,786 | 3.78% | $ 25,483 | 3.77% | ||||||||||||
| Net interest margin (4) | 4.00% | 3.91% | ||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 133% | 130% | ||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Average | Yield | Average | Yield | |||||||||||||
| Balance | Interest(1) | Rate | Balance | Interest(1) | Rate | |||||||||||
| Interest-earning assets: | ||||||||||||||||
| Loans receivable | $ 2,352,514 | $ 83,633 | 4.75% | $ 2,171,733 | $ 73,415 | 4.52% | ||||||||||
| Securities | 276,745 | 6,637 | 3.21% | (3) | 257,924 | 6,475 | 3.40% | (3) | ||||||||
| Interest Bearing Deposits | 66,283 | 945 | 1.91% | 66,299 | 555 | 1.12% | ||||||||||
| FHLB stock | 15,456 | 698 | 6.04% | 15,513 | 562 | 4.84% | ||||||||||
| Total interest-earning assets | 2,710,998 | 91,913 | 4.53% | 2,511,469 | 81,007 | 4.32% | ||||||||||
| Non-interest-earning assets | 307,634 | 301,091 | ||||||||||||||
| Total assets | $ 3,018,632 | $ 2,812,560 | ||||||||||||||
| Deposits and Interest-bearing liabilities: | ||||||||||||||||
| Interest bearing deposits | $ 1,925,972 | $ 9,508 | 0.66% | $ 1,743,769 | $ 6,357 | 0.49% | ||||||||||
| FHLB advances and other | 74,634 | 943 | 1.69% | 104,616 | 1,211 | 1.55% | ||||||||||
| Subordinated debentures | 36,195 | 934 | 3.45% | 36,155 | 682 | 2.51% | ||||||||||
| Notes payable | 10,185 | 19 | 0.25% | 27,484 | 41 | 0.20% | ||||||||||
| Total interest-bearing liabilities | 2,046,986 | 11,404 | 0.74% | 1,912,024 | 8,291 | 0.58% | ||||||||||
| Non-interest bearing deposits | 552,554 | - | - | 521,161 | - | - | ||||||||||
| Total including non-interest-bearing demand deposits | 2,599,540 | 11,404 | 0.59% | 2,433,185 | 8,291 | 0.46% | ||||||||||
| Other non-interest-bearing liabilities | 37,586 | 34,183 | ||||||||||||||
| Total liabilities | 2,637,126 | 2,467,368 | ||||||||||||||
| Stockholders' equity | 381,506 | 345,192 | ||||||||||||||
| Total liabilities and stockholders' equity | $ 3,018,632 | $ 2,812,560 | ||||||||||||||
| Net interest income; interest rate spread | $ 80,509 | 3.79% | $ 72,716 | 3.74% | ||||||||||||
| Net interest margin (4) | 3.97% | 3.88% | ||||||||||||||
| Average interest-earning assets to average interest bearing liabilities | 132% | 131% | ||||||||||||||
|
(1) |
Interest on certain tax exempt loans and securities is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 21% in 2018 and 35% in 2017. |
|
|
(2) |
Annualized |
|
|
(3) |
Securities yield = annualized interest income divided by the average balance of securities, excluding average unrealized gains/losses. |
|
|
(4) |
Net interest margin is tax equivalent net interest income divided by average interest-earning assets. |
|
| Selected Quarterly Information | ||||||||||||||||||||
| First Defiance Financial Corp. | ||||||||||||||||||||
| (dollars in thousands, except per share data) | 3rd Qtr 2018 | 2nd Qtr 2018 | 1st Qtr 2018 | 4th Qtr 2017 | 3rd Qtr 2017 | |||||||||||||||
| Summary of Operations | ||||||||||||||||||||
| Tax-equivalent interest income (1) | $ | 32,220 | $ | 30,550 | $ | 29,142 | $ | 29,009 | $ | 28,557 | ||||||||||
| Interest expense | 4,434 | 3,752 | 3,218 | 3,140 | 3,074 | |||||||||||||||
| Tax-equivalent net interest income (1) | 27,786 | 26,798 | 25,924 | 25,869 | 25,483 | |||||||||||||||
| Provision for loan losses | 1,376 | 423 | (1,095 | ) | 314 | 462 | ||||||||||||||
| Tax-equivalent NII after provision for loan losses (1) | 26,410 | 26,375 | 27,019 | 25,555 | 25,021 | |||||||||||||||
| Investment securities gains, net of impairment | 76 | - | - | 160 | 158 | |||||||||||||||
| Non-interest income (excluding securities gains/losses) | 9,846 | 10,214 | 10,703 | 9,737 | 9,337 | |||||||||||||||
| Non-interest expense | 22,286 | 22,665 | 23,251 | 21,141 | 20,440 | |||||||||||||||
| Income taxes | 2,483 | 2,564 | 2,497 | 4,430 | 4,219 | |||||||||||||||
| Net income | 11,306 | 11,109 | 11,737 | 9,399 | 9,381 | |||||||||||||||
| Tax equivalent adjustment (1) | 257 | 251 | 237 | 482 | 476 | |||||||||||||||
| At Period End | ||||||||||||||||||||
| Total assets | $ | 3,098,093 | $ | 3,039,589 | $ | 3,023,004 | $ | 2,993,403 | $ | 2,935,030 | ||||||||||
| Earning assets | 2,810,624 | 2,756,712 | 2,748,338 | 2,691,438 | 2,633,996 | |||||||||||||||
| Loans | 2,456,357 | 2,385,344 | 2,358,330 | 2,348,713 | 2,276,042 | |||||||||||||||
| Allowance for loan losses | 27,639 | 27,321 | 27,267 | 26,683 | 26,341 | |||||||||||||||
| Deposits | 2,524,431 | 2,489,128 | 2,491,801 | 2,437,656 | 2,360,675 | |||||||||||||||
| Stockholders’ equity | 393,457 | 386,920 | 379,214 | 373,286 | 367,924 | |||||||||||||||
| Stockholders’ equity / assets | 12.70 | % | 12.73 | % | 12.54 | % | 12.47 | % | 12.54 | % | ||||||||||
| Goodwill | 98,569 | 98,569 | 98,569 | 98,569 | 98,370 | |||||||||||||||
| Average Balances | ||||||||||||||||||||
| Total assets | $ | 3,059,225 | $ | 3,018,808 | $ | 2,977,864 | $ | 2,968,445 | $ | 2,906,795 | ||||||||||
| Earning assets | 2,754,561 | 2,714,328 | 2,664,114 | 2,646,643 | 2,590,463 | |||||||||||||||
| Loans | 2,403,932 | 2,337,294 | 2,316,316 | 2,279,358 | 2,251,071 | |||||||||||||||
| Deposits and interest-bearing liabilities | 2,633,054 | 2,600,029 | 2,565,537 | 2,560,258 | 2,507,805 | |||||||||||||||
| Deposits | 2,513,708 | 2,487,430 | 2,434,440 | 2,400,061 | 2,338,817 | |||||||||||||||
| Stockholders’ equity | 389,361 | 381,165 | 373,993 | 369,366 | 363,612 | |||||||||||||||
| Stockholders’ equity / assets | 12.73 | % | 12.63 | % | 12.56 | % | 12.44 | % | 12.51 | % | ||||||||||
| Per Common Share Data | ||||||||||||||||||||
| Net Income: | ||||||||||||||||||||
| Basic | $ | 0.55 | $ | 0.54 | $ | 0.58 | $ | 0.47 | $ | 0.46 | ||||||||||
| Diluted | 0.55 | 0.54 | 0.58 | 0.46 | 0.46 | |||||||||||||||
| Dividends | 0.17 | 0.15 | 0.150 | 0.125 | 0.125 | |||||||||||||||
| Market Value: | ||||||||||||||||||||
| High | $ | 35.00 | $ | 33.72 | $ | 29.93 | $ | 28.46 | $ | 27.00 | ||||||||||
| Low | 29.61 | 27.63 | 25.51 | 25.14 | 23.51 | |||||||||||||||
| Close | 30.11 | 33.53 | 28.66 | 25.99 | 26.25 | |||||||||||||||
| Common Book Value | 19.29 | 18.97 | 18.62 | 18.38 | 18.13 | |||||||||||||||
| Shares outstanding, end of period (in thousands) | 20,396 | 20,396 | 20,364 | 20,312 | 20,298 | |||||||||||||||
| Performance Ratios (annualized) | ||||||||||||||||||||
| Tax-equivalent net interest margin (1) | 4.00 | % | 3.95 | % | 3.95 | % | 3.88 | % | 3.91 | % | ||||||||||
| Return on average assets | 1.47 | % | 1.48 | % | 1.60 | % | 1.26 | % | 1.28 | % | ||||||||||
| Return on average equity | 11.52 | % | 11.69 | % | 12.73 | % | 10.10 | % | 10.24 | % | ||||||||||
| Efficiency ratio (2) | 59.22 | % | 61.24 | % | 63.48 | % | 59.37 | % | 58.70 | % | ||||||||||
| Effective tax rate | 18.01 | % | 18.75 | % | 17.54 | % | 32.03 | % | 31.02 | % | ||||||||||
| Common dividend payout ratio (basic) | 30.91 | % | 27.78 | % | 26.09 | % | 26.88 | % | 27.17 | % | ||||||||||
|
(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 21% in 2018 and 35% in 2017. |
|
|
(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 2018 | 2nd Qtr 2018 | 1st Qtr 2018 | 4th Qtr 2017 | 3rd Qtr 2017 | |||||||||||||||
| Loan Portfolio Composition | ||||||||||||||||||||
| One to four family residential real estate | $ | 313,300 | $ | 307,480 | $ | 275,547 | $ | 274,862 | $ | 271,048 | ||||||||||
| Construction | 274,344 | 283,911 | 251,944 | 265,476 | 244,920 | |||||||||||||||
| Commercial real estate | 1,363,087 | 1,283,698 | 1,282,027 | 1,235,221 | 1,205,695 | |||||||||||||||
| Commercial | 489,393 | 489,296 | 500,496 | 526,142 | 510,240 | |||||||||||||||
| Consumer finance | 32,379 | 29,724 | 28,035 | 29,109 | 29,009 | |||||||||||||||
| Home equity and improvement | 129,295 | 129,868 | 133,407 | 135,457 | 132,220 | |||||||||||||||
| Total loans | 2,601,798 | 2,523,977 | 2,471,456 | 2,466,267 | 2,393,132 | |||||||||||||||
| Less: | ||||||||||||||||||||
| Undisbursed loan funds | 143,286 | 136,563 | 111,450 | 115,972 | 115,714 | |||||||||||||||
| Deferred loan origination fees | 2,155 | 2,070 | 1,676 | 1,582 | 1,379 | |||||||||||||||
| Allowance for loan loss | 27,639 | 27,321 | 27,267 | 26,683 | 26,341 | |||||||||||||||
| Net Loans | $ | 2,428,718 | $ | 2,358,023 | $ | 2,331,063 | $ | 2,322,030 | $ | 2,249,698 | ||||||||||
| Allowance for loan loss activity | ||||||||||||||||||||
| Beginning allowance | $ | 27,321 | $ | 27,267 | $ | 26,683 | $ | 26,341 | $ | 25,915 | ||||||||||
| Provision for loan losses | 1,376 | 423 | (1,095 | ) | 314 | 462 | ||||||||||||||
| Credit loss charge-offs: | ||||||||||||||||||||
| One to four family residential real estate | 136 | 78 | 16 | 170 | 60 | |||||||||||||||
| Commercial real estate | 1,048 | 254 | 55 | 29 | 0 | |||||||||||||||
| Commercial | 528 | 84 | 97 | 210 | 64 | |||||||||||||||
| Consumer finance | 25 | 72 | 31 | 27 | 20 | |||||||||||||||
| Home equity and improvement | 36 | 41 | 117 | 55 | 92 | |||||||||||||||
| Total charge-offs | 1,773 | 529 | 316 | 491 | 236 | |||||||||||||||
| Total recoveries | 715 | 160 | 1,995 | 519 | 200 | |||||||||||||||
| Net charge-offs (recoveries) | 1,058 | 369 | (1,679 | ) | (28 | ) | 36 | |||||||||||||
| Ending allowance | $ | 27,639 | $ | 27,321 | $ | 27,267 | $ | 26,683 | $ | 26,341 | ||||||||||
| Credit Quality | ||||||||||||||||||||
| Total non-performing loans (1) | $ | 20,929 | $ | 18,340 | $ | 27,925 | $ | 30,715 | $ | 29,152 | ||||||||||
| Real estate owned (REO) | 1,676 | 1,795 | 1,440 | 1,532 | 532 | |||||||||||||||
| Total non-performing assets (2) | $ | 22,605 | $ | 20,135 | $ | 29,365 | $ | 32,247 | $ | 29,684 | ||||||||||
| Net charge-offs (recoveries) | 1,058 | 369 | (1,679 | ) | (28 | ) | 36 | |||||||||||||
| Restructured loans, accruing (3) | 12,611 | 15,834 | 13,722 | 13,770 | 13,044 | |||||||||||||||
| Allowance for loan losses / loans | 1.13 | % | 1.15 | % | 1.16 | % | 1.14 | % | 1.16 | % | ||||||||||
| Allowance for loan losses / non-performing assets | 122.27 | % | 135.69 | % | 92.86 | % | 82.75 | % | 88.74 | % | ||||||||||
| Allowance for loan losses / non-performing loans | 132.06 | % | 148.97 | % | 97.64 | % | 86.87 | % | 90.36 | % | ||||||||||
| Non-performing assets / loans plus REO | 0.92 | % | 0.84 | % | 1.24 | % | 1.37 | % | 1.30 | % | ||||||||||
| Non-performing assets / total assets | 0.73 | % | 0.66 | % | 0.97 | % | 1.08 | % | 1.01 | % | ||||||||||
| Net charge-offs / average loans (annualized) | 0.18 | % | 0.06 | % | -0.29 | % | 0.00 | % | 0.01 | % | ||||||||||
| Deposit Balances | ||||||||||||||||||||
| Non-interest-bearing demand deposits | $ | 556,316 | $ | 548,147 | $ | 550,742 | $ | 571,360 | $ | 519,911 | ||||||||||
| Interest-bearing demand deposits and money market | 1,016,294 | 1,021,445 | 1,055,416 | 1,005,519 | 989,514 | |||||||||||||||
| Savings deposits | 293,359 | 297,870 | 306,510 | 302,022 | 296,230 | |||||||||||||||
| Retail time deposits less than $250,000 | 564,379 | 547,871 | 512,746 | 504,912 | 504,277 | |||||||||||||||
| Retail time deposits greater than $250,000 | 94,083 | 73,795 | 66,387 | 53,843 | 50,743 | |||||||||||||||
| Total deposits | $ | 2,524,431 | $ | 2,489,128 | $ | 2,491,801 | $ | 2,437,656 | $ | 2,360,675 | ||||||||||
|
(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 | ||||||||
|
|
||||||||||||
| September 30, 2018 | ||||||||||||
| One to four family residential real estate | $ | 313,300 | $ | 308,108 | $ | 1,680 | $ | 3,512 | ||||
| Construction | 274,344 | 274,344 | - | - | ||||||||
| Commercial real estate | 1,363,087 | 1,351,257 | 138 | 11,692 | ||||||||
| Commercial | 489,393 | 484,216 | 48 | 5,129 | ||||||||
| Consumer finance | 32,379 | 32,124 | 221 | 34 | ||||||||
| Home equity and improvement | 129,295 | 127,291 | 1,442 | 562 | ||||||||
| Total loans | $ | 2,601,798 | $ | 2,577,340 | $ | 3,529 | $ | 20,929 | ||||
| December 31, 2017 | ||||||||||||
| One to four family residential real estate | $ | 274,862 | $ | 269,624 | $ | 2,201 | $ | 3,037 | ||||
| Construction | 265,476 | 265,476 | - | - | ||||||||
| Commercial real estate | 1,235,221 | 1,215,980 | 1,022 | 18,219 | ||||||||
| Commercial | 526,142 | 515,874 | 1,427 | 8,841 | ||||||||
| Consumer finance | 29,109 | 28,728 | 353 | 28 | ||||||||
| Home equity and improvement | 135,457 | 131,986 | 2,881 | 590 | ||||||||
| Total loans | $ | 2,466,267 | $ | 2,427,668 | $ | 7,884 | $ | 30,715 | ||||
| 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 | ||||
