First Defiance Financial Corp. Announces 2019 Second Quarter Earnings

  • Diluted earnings per share of $0.61 for 2019 second quarter, up 13% from $0.54 in the 2018 second quarter
  • Net income of $12.2 million for 2019 second quarter, up 10% from $11.1 million in the 2018 second quarter
  • Return on average assets of 1.52% for the 2019 second quarter, compared to 1.48% in the 2018 second quarter
  • Net interest margin of 4.03% for the 2019 second quarter, up from 3.95% in the 2018 second quarter
  • Loan growth of $75.3 million during 2019 second quarter
  • Non-performing assets of $15.3 million as of 2019 second quarter, compared to $20.1 million as of 2018 second quarter

DEFIANCE, Ohio--()--First Defiance Financial Corp. (NASDAQ: FDEF) announced today its unaudited financial results for the three and six-month periods ended June 30, 2019. Net income for the second quarter ended June 30, 2019, totaled $12.2 million, or $0.61 per diluted common share compared to $11.1 million or $0.54 per diluted common share for the quarter ended June 30, 2018. Net income for the six months ended June 30, 2019, totaled $23.7 million, or $1.19 per diluted common share compared to $22.8 million or $1.12 per diluted common share for the six months ended June 30, 2018.

“Solid loan growth, net interest margin expansion, and continued asset quality improvement from a year ago are all highlights within our quarterly results,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance Financial Corp. “Our return on average assets increased to 1.52% in the second quarter from 1.48% last year while total assets grew 7.8% over prior year. Our performance encourages our very positive outlook for the rest of the year.”

Net Interest Income up from Second Quarter of 2018

Net interest income of $29.0 million in the second quarter of 2019 was up from $26.5 million in the second quarter of 2018. The increase was primarily due to the growth in earning assets supplemented by expansion in the net interest margin versus the second quarter of last year. Net interest margin was 4.03% for the second of 2019, and up from 3.95% in the second quarter of 2018. Yield on interest earning assets increased by 38 basis points, to 4.89% in the second quarter of 2019 from 4.51% in the second quarter of 2018. The cost of interest-bearing liabilities increased by 40 basis points in the second quarter of 2019 to 1.14% from 0.74% in the second quarter of 2018.

“Successes in the implementation of our growth strategies were evident this quarter with annualized loan growth of 11.8%,” said Hileman. “Further, our net interest margin remains strong at 4.03%, consistent with prior quarter and up 8 basis points from prior year. Loan growth and margin expansion combined to increase net interest income 9.2% over the second quarter last year.”

Non-Interest Income up from Second Quarter of 2018

First Defiance’s non-interest income for the second quarter of 2019 was $10.5 million compared with $10.2 million in the second quarter of 2018. Results for the second quarter of 2019 included $93,000 of BOLI income death benefit whereas the second quarter of 2018 included $168,000 of BOLI income death benefit.

Mortgage banking income was $2.1 million in the second quarter of 2019, up from $2.0 million in the second quarter of 2018. Mortgage originations totaled $85.5 million in the second quarter of 2019, up seasonally from the first quarter of 2019 and up from $80.5 million in the same quarter of last year. Gains from the sale of mortgage loans increased in the second quarter of 2019 to $1.8 million from $1.4 million in the second quarter of 2018. Mortgage loan servicing revenue was $943,000 in the second quarter of 2019, up slightly from $933,000 in the second quarter of 2018. First Defiance had a negative change in the valuation adjustment in mortgage servicing assets of $190,000 in the second quarter of 2019 compared with a positive adjustment of $47,000 in the second quarter of 2018. In addition, gains on the sale of non-mortgages, which include SBA and FSA loans, totaled $21,000 in the second quarter of 2019 compared to $43,000 in the second quarter of 2018.

For the second quarter of 2019, commissions from the sale of insurance products were $3.6 million, up from $3.5 million in the second quarter of 2018. Service fees and other charges were $3.3 million in the second quarter of 2019, consistent with $3.3 million in the second quarter of 2018. Trust income was $476,000 in the second quarter of 2019, down from $522,000 in the second quarter of 2018. Income from BOLI was $528,000 in the second quarter of 2019, down from $566,000 in the second quarter of 2018 primarily due to the decrease in death benefits described above. Other non-interest income was $407,000 in the second quarter of 2019, up from $281,000 in the second quarter of 2018.

“All of our non-interest income business lines are continuing to positively contribute to our earnings,” said Hileman. “Insurance commissions and mortgage banking had good growth compared to the second quarter of last year, which more than offset the results from other lines. Total non-interest income, excluding BOLI death benefits, increased 3.5% over the second quarter of 2018.”

Non-Interest Expenses up from Second Quarter of 2018

Total non-interest expense was $24.2 million in the second quarter of 2019, an increase from $22.7 million in the second quarter of 2018. Compensation and benefits increased to $14.4 million in the second quarter of 2019, compared to $12.9 million in the second quarter of 2018. The increase in compensation and benefits from a year ago is mainly due to additions to staff to support growth strategies, merit increases, and higher medical benefit costs. Occupancy, FDIC premiums, financial institution taxes, data processing and intangibles amortization increased to $5.7 million in the second quarter of 2019, up from $5.2 million in the second quarter of 2018. Other non-interest expenses of $4.2 million in the second quarter of 2019 was down from $4.6 million in the second quarter of 2018.

Credit Quality

Non-performing loans totaled $15.3 million at June 30, 2019, a decrease from $18.3 million at June 30, 2018. In addition, First Defiance had no real estate owned at June 30, 2019, compared to $1.8 million at June 30, 2018. Accruing troubled debt restructured loans were $10.3 million at June 30, 2019, compared with $15.8 million at June 30, 2018.

The second quarter 2019 results include net recoveries of $488,000 and a provision expense for loan losses of $282,000 compared with net charge-offs of $369,000 and a provision expense of $423,000 for the same period in 2018. The allowance for loan loss as a percentage of total loans was 1.10% at June 30, 2019, compared with 1.10% at March 31, 2019, and 1.15% at June 30, 2018.

“We are very pleased with the decrease in our non-performing assets and improvements in our asset quality ratios this quarter,” said Hileman. “Non-performing assets at June 30, 2019, declined 24% from last year and now represents only 0.47% of assets. However, we seek further improvements in asset quality throughout the remainder of the year.”

Year-To-Date Results

For the six-month period ended June 30, 2019, net income totaled $23.7 million, or $1.19 per diluted common share, compared to $22.8 million, or $1.12 per diluted common share for the six months ended June 30, 2018. The year-to-year comparison is impacted by the prior year’s results, including a significant loan recovery and a credit loan loss provision of $672,000, which had an after tax benefit of $531,000, or $0.03 per diluted share. The first half 2019 included a provision for loan losses expense of $494,000, which had an after tax cost of $390,000, or $0.02 per diluted share.

Net interest income was $57.3 million for the first six months of 2019 compared with $52.2 million in the first six months of 2018. Average interest-earning assets increased to $2.89 billion in the first six months of 2019 compared to $2.69 billion in the first six months of 2018. Net interest margin for the first six months of 2019 was 4.03%, up eight basis points from the 3.95% margin reported in the six-month period ended June 30, 2018.

Non-interest income for the first six months of 2019 was $21.3 million compared to $20.9 million during the same period of 2018. Service fees and other charges were $6.3 million for the first six months of 2019, down from $6.4 million during the same period of 2018. Mortgage banking income was $4.0 million for the first six months of 2019, up from $3.8 million during the same period of 2018. Insurance commissions were $7.7 million for the first six months of 2019 compared with $7.8 million for the same period of 2018.

Non-interest expense was $49.1 million for the first six months of 2019, up from $45.9 million for the same period of 2018. Compensation and benefits expense was $28.5 million for the first six months of 2019 compared with $26.1 million during the same period of 2018. Expenses also included increases in occupancy of $448,000 and data processing of $376,000.

Total Assets at $3.28 Billion

Total assets at June 30, 2019, were $3.28 billion compared to $3.18 billion at December 31, 2018, and $3.04 billion at June 30, 2018. Net loans receivable (excluding loans held for sale) were $2.60 billion at June 30, 2019, compared to $2.51 billion at December 31, 2018, and $2.36 billion at June 30, 2018. Also, at June 30, 2019, goodwill and other intangible assets totaled $102.4 million compared to $103.0 million at December 31, 2018, and $103.6 million at June 30, 2018. Total deposits at June 30, 2019, were $2.68 billion compared with $2.62 billion at December 31, 2018, and $2.49 billion at June 30, 2018. Total stockholders’ equity was $407.2 million at June 30, 2019, compared to $399.6 million at December 31, 2018, and $386.9 million at June 30, 2018. During the quarter ended March 31, 2019, the company completed the repurchase of 515,000 shares of its common stock for $15.1 million. During the quarter ended June 30, 2019, the company announced a new 500,000 share repurchase plan authorization with all such shares available for repurchase as of June 30, 2019.

Dividend to be Paid August 23

The Board of Directors declared a quarterly cash dividend of $0.19 per common share payable August 23, 2019, to shareholders of record at the close of business on August 16, 2019. The dividend represents an annual dividend of 2.79 percent based on the First Defiance common stock closing price on July 19, 2019. First Defiance has approximately 19,727,628 common shares outstanding.

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. ET on Tuesday, July 23, 2019, 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/fdef190722.html. The replay of the conference call Webcast will be available at www.fdef.com until 9:00 a.m. ET on July 22, 2020.

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 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, 2018. 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, 2019, 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)

2019

 

2018

 
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions

$

50,597

 

$

55,962

 

Interest-bearing deposits

 

33,000

 

 

43,000

 

 

83,597

 

 

98,962

 

Securities
Available-for sale, carried at fair value

 

296,115

 

 

294,076

 

Held-to-maturity, carried at amortized cost

 

485

 

 

526

 

 

296,600

 

 

294,602

 

 
Loans

 

2,624,219

 

 

2,540,039

 

Allowance for loan losses

 

(28,934

)

 

(28,331

)

Loans, net

 

2,595,285

 

 

2,511,708

 

Loans held for sale

 

14,509

 

 

6,613

 

Mortgage servicing rights

 

9,855

 

 

10,119

 

Accrued interest receivable

 

10,771

 

 

9,641

 

Federal Home Loan Bank stock

 

11,915

 

 

14,217

 

Bank Owned Life Insurance

 

75,086

 

 

67,660

 

Office properties and equipment

 

39,959

 

 

40,670

 

Real estate and other assets held for sale

 

-

 

 

1,205

 

Goodwill

 

98,569

 

 

98,569

 

Core deposit and other intangibles

 

3,816

 

 

4,391

 

Other assets

 

37,590

 

 

23,365

 

Total Assets

$

3,277,552

 

$

3,181,722

 

 
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits

$

584,735

 

$

607,198

 

Interest-bearing deposits

 

2,095,902

 

 

2,013,684

 

Total deposits

 

2,680,637

 

 

2,620,882

 

Advances from Federal Home Loan Bank

 

105,178

 

 

85,189

 

Notes payable and other interest-bearing liabilities

 

3,064

 

 

5,741

 

Subordinated debentures

 

36,083

 

 

36,083

 

Advance payments by borrowers for tax and insurance

 

3,550

 

 

3,652

 

Deferred taxes

 

2,205

 

 

264

 

Other liabilities

 

39,619

 

 

30,322

 

Total Liabilities

 

2,870,336

 

 

2,782,133

 

Stockholders’ Equity
Preferred stock

 

-

 

 

-

 

Common stock, net

 

127

 

 

127

 

Additional paid-in-capital

 

161,205

 

 

161,593

 

Accumulated other comprehensive income (loss)

 

4,167

 

 

(2,148

)

Retained earnings

 

312,282

 

 

295,588

 

Treasury stock, at cost

 

(70,565

)

 

(55,571

)

Total stockholders’ equity

 

407,216

 

 

399,589

 

Total Liabilities and Stockholders’ Equity

$

3,277,552

 

$

3,181,722

 

 
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)

2019

 

2018

 

2019

 

2018

Interest Income:
Loans

$

32,660

$

27,660

$

63,874

$

54,186

 

Investment securities

 

2,138

 

2,039

 

4,343

 

3,890

 

Interest-bearing deposits

 

260

 

373

 

545

 

670

 

FHLB stock dividends

 

183

 

227

 

398

 

458

 

Total interest income

 

35,241

 

30,299

 

69,160

 

59,204

 

Interest Expense:
Deposits

 

5,581

 

3,144

 

10,586

 

5,755

 

FHLB advances and other

 

304

 

282

 

580

 

601

 

Subordinated debentures

 

350

 

320

 

714

 

600

 

Notes Payable

 

17

 

6

 

21

 

14

 

Total interest expense

 

6,252

 

3,752

 

11,901

 

6,970

 

Net interest income

 

28,989

 

26,547

 

57,259

 

52,234

 

Provision for loan losses

 

282

 

423

 

494

 

(672

)

Net interest income after provision for loan losses

 

28,707

 

26,124

 

56,765

 

52,906

 

Non-interest Income:
Service fees and other charges

 

3,301

 

3,296

 

6,308

 

6,427

 

Mortgage banking income

 

2,137

 

2,013

 

3,978

 

3,755

 

Gain on sale of non-mortgage loans

 

21

 

43

 

110

 

267

 

Gain on sale of securities

 

-

 

-

 

-

 

-

 

Insurance commissions

 

3,616

 

3,493

 

7,731

 

7,770

 

Trust income

 

476

 

522

 

999

 

1,074

 

Income from Bank Owned Life Insurance

 

527

 

566

 

919

 

966

 

Other non-interest income

 

408

 

281

 

1,254

 

658

 

Total Non-interest Income

 

10,486

 

10,214

 

21,299

 

20,917

 

Non-interest Expense:
Compensation and benefits

 

14,398

 

12,885

 

28,483

 

26,134

 

Occupancy

 

2,304

 

2,026

 

4,545

 

4,097

 

FDIC insurance premium

 

258

 

202

 

531

 

562

 

Financial institutions tax

 

556

 

531

 

1,112

 

1,062

 

Data processing

 

2,267

 

2,083

 

4,564

 

4,188

 

Amortization of intangibles

 

276

 

332

 

575

 

679

 

Other non-interest expense

 

4,176

 

4,606

 

9,291

 

9,194

 

Total Non-interest Expense

 

24,235

 

22,665

 

49,101

 

45,916

 

Income before income taxes

 

14,958

 

13,673

 

28,963

 

27,907

 

Income taxes

 

2,759

 

2,564

 

5,282

 

5,061

 

Net Income

$

12,199

$

11,109

$

23,681

$

22,846

 

 
 
Earnings per common share:
Basic

$

0.62

$

0.54

$

1.19

$

1.12

 

Diluted

$

0.61

$

0.54

$

1.19

$

1.12

 

 
Average Shares Outstanding:
Basic

 

19,780

 

20,388

 

19,897

 

20,359

 

Diluted

 

19,860

 

20,492

 

19,976

 

20,466

 

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)

2019

 

2018

 

% change

 

2019

 

2018

 

% change

Summary of Operations
 
Tax-equivalent interest income (2)

$

35,490

 

$

30,550

 

16.2

%

$

69,656

 

$

59,693

 

16.7

%

Interest expense

 

6,252

 

 

3,752

 

66.6

 

 

11,901

 

 

6,970

 

70.7

 

Tax-equivalent net interest income (2)

 

29,238

 

 

26,798

 

9.1

 

 

57,755

 

 

52,723

 

9.5

 

Provision for loan losses

 

282

 

 

423

 

(33.3

)

 

494

 

 

(672

)

(173.5

)

Tax-equivalent NII after provision for loan loss (2)

 

28,956

 

 

26,375

 

9.8

 

 

57,261

 

 

53,395

 

7.2

 

Investment securities gains

 

-

 

 

-

 

-

 

 

-

 

 

-

 

-

 

Non-interest income (excluding securities gains/losses)

 

10,486

 

 

10,214

 

2.7

 

 

21,299

 

 

20,917

 

1.8

 

Non-interest expense

 

24,235

 

 

22,665

 

6.9

 

 

49,101

 

 

45,916

 

6.9

 

Income taxes

 

2,759

 

 

2,564

 

7.6

 

 

5,282

 

 

5,061

 

4.4

 

Net Income

 

12,199

 

 

11,109

 

9.8

 

 

23,681

 

 

22,846

 

3.7

 

Tax equivalent adjustment (2)

 

249

 

 

251

 

(0.8

)

 

496

 

 

489

 

1.4

 

At Period End
Assets

 

3,277,552

 

 

3,039,589

 

7.8

 

Earning assets

 

2,980,243

 

 

2,756,712

 

8.1

 

Loans

 

2,624,219

 

 

2,385,344

 

10.0

 

Allowance for loan losses

 

28,934

 

 

27,321

 

5.9

 

Deposits

 

2,680,637

 

 

2,489,128

 

7.7

 

Stockholders’ equity

 

407,216

 

 

386,920

 

5.2

 

Average Balances
Assets

 

3,223,997

 

 

3,018,808

 

6.8

 

 

3,203,504

 

 

2,998,336

 

6.8

 

Earning assets

 

2,914,587

 

 

2,714,328

 

7.4

 

 

2,892,964

 

 

2,689,216

 

7.6

 

Loans

 

2,561,341

 

 

2,337,294

 

9.6

 

 

2,539,312

 

 

2,326,805

 

9.1

 

Deposits and interest-bearing liabilities

 

2,781,216

 

 

2,600,029

 

7.0

 

 

2,761,921

 

 

2,582,782

 

6.9

 

Deposits

 

2,678,060

 

 

2,487,430

 

7.7

 

 

2,660,109

 

 

2,460,934

 

8.1

 

Stockholders’ equity

 

398,612

 

 

381,165

 

4.6

 

 

396,875

 

 

377,579

 

5.1

 

Stockholders’ equity / assets

 

12.36

%

 

12.63

%

(2.1

)

 

12.39

%

 

12.59

%

(1.6

)

Per Common Share Data
Net Income
Basic

$

0.62

 

$

0.54

 

14.8

 

$

1.19

 

$

1.12

 

6.2

 

Diluted

 

0.61

 

 

0.54

 

13.0

 

 

1.19

 

 

1.12

 

6.2

 

Dividends

 

0.19

 

 

0.15

 

26.7

 

 

0.38

 

 

0.30

 

26.7

 

Market Value:
High

$

30.44

 

$

33.72

 

(9.7

)

$

31.30

 

$

33.72

 

(7.2

)

Low

 

26.59

 

 

27.63

 

(3.8

)

 

24.12

 

 

25.51

 

(5.4

)

Close

 

28.57

 

 

33.53

 

(14.8

)

 

28.57

 

 

33.53

 

(14.8

)

Common Book Value

 

20.65

 

 

18.97

 

8.8

 

 

20.65

 

 

18.97

 

8.8

 

Tangible Common Book Value (1)

 

15.46

 

 

13.89

 

11.3

 

 

15.46

 

 

13.89

 

11.3

 

Shares outstanding, end of period (000)

 

19,723

 

 

20,396

 

(3.3

)

 

19,723

 

 

20,396

 

(3.3

)

Performance Ratios (annualized)
Tax-equivalent net interest margin (2)

 

4.03

%

 

3.95

%

1.8

 

 

4.03

%

 

3.95

%

1.9

 

Return on average assets

 

1.52

%

 

1.48

%

2.8

 

 

1.49

%

 

1.54

%

(3.0

)

Return on average equity

 

12.28

%

 

11.69

%

5.0

 

 

12.03

%

 

12.20

%

(1.4

)

Efficiency ratio (3)

 

61.01

%

 

61.24

%

(0.4

)

 

62.11

%

 

62.35

%

(0.4

)

Effective tax rate

 

18.44

%

 

18.75

%

(1.6

)

 

18.24

%

 

18.14

%

0.6

 

Dividend payout ratio (basic)

 

30.65

%

 

27.78

%

10.3

 

 

31.93

%

 

26.79

%

19.2

 

(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 21%.

(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)

2019

 

2018

 

2019

 

2018

 
Gain from sale of mortgage loans

$

1,775

 

$

1,383

 

$

3,076

 

$

2,464

 

Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue

 

943

 

 

933

 

 

1,882

 

 

1,877

 

Amortization of mortgage servicing rights

 

(391

)

 

(350

)

 

(677

)

 

(669

)

Mortgage servicing rights valuation adjustments

 

(190

)

 

47

 

 

(303

)

 

83

 

 

362

 

 

630

 

 

902

 

 

1,291

 

Total revenue from sale and servicing of mortgage loans

$

2,137

 

$

2,013

 

$

3,978

 

$

3,755

 

 
 
Yield Analysis
First Defiance Financial Corp.

Three Months Ended June 30,

(dollars in thousands)

2019

 

2018

Average

 

 

 

Yield

 

Average

 

 

 

Yield

Balance

 

Interest(1)

 

Rate(2)

 

Balance

 

Interest(1)

 

Rate(2)

Interest-earning assets:
Loans receivable

$

2,561,341

$

32,683

5.12

%

$

2,337,294

$

27,685

4.75

%

Securities

 

299,235

 

2,364

3.19

%

(3)

 

280,131

 

2,265

3.20

%

(3)

Interest Bearing Deposits

 

41,934

 

260

2.49

%

 

80,914

 

373

1.85

%

FHLB stock

 

12,077

 

183

6.08

%

 

15,989

 

227

5.69

%

Total interest-earning assets

 

2,914,587

 

35,490

4.89

%

 

2,714,328

 

30,550

4.51

%

Non-interest-earning assets

 

309,410

 

304,480

Total assets

$

3,223,997

$

3,018,808

Deposits and Interest-bearing liabilities:
Interest bearing deposits

$

2,093,751

$

5,581

1.07

%

$

1,933,409

$

3,144

0.65

%

FHLB advances and other

 

62,466

 

304

1.95

%

 

67,261

 

282

1.68

%

Subordinated debentures

 

36,083

 

350

3.89

%

 

36,198

 

320

3.55

%

Notes payable

 

4,607

 

17

1.48

%

 

9,140

 

6

0.26

%

Total interest-bearing liabilities

 

2,196,907

 

6,252

1.14

%

 

2,046,008

 

3,752

0.74

%

Non-interest bearing deposits

 

584,309

 

-

-

 

 

554,021

 

-

-

 

Total including non-interest-bearing demand deposits

 

2,781,216

 

6,252

0.90

%

 

2,600,029

 

3,752

0.58

%

Other non-interest-bearing liabilities

 

44,169

 

37,614

Total liabilities

 

2,825,385

 

2,637,643

Stockholders' equity

 

398,612

 

381,165

Total liabilities and stockholders' equity

$

3,223,997

$

3,018,808

Net interest income; interest rate spread

$

29,238

3.75

%

$

26,798

3.77

%

Net interest margin (4)

4.03

%

3.95

%

Average interest-earning assets to average interest bearing liabilities

133

%

133

%

 

Six Months Ended June 30,

2019

2018

Average Yield Average Yield
Balance Interest(1) Rate Balance Interest(1) Rate
Interest-earning assets:
Loans receivable

$

2,539,312

$

63,921

5.08

%

$

2,326,805

$

54,236

4.70

%

Securities

 

297,530

 

4,792

3.25

%

(3)

 

271,864

 

4,329

3.21

%

(3)

Interest Bearing Deposits

 

43,343

 

545

2.54

%

 

74,557

 

670

1.81

%

FHLB stock

 

12,779

 

398

6.28

%

 

15,990

 

458

5.78

%

Total interest-earning assets

 

2,892,964

 

69,656

4.86

%

 

2,689,216

 

59,693

4.48

%

Non-interest-earning assets

 

310,540

 

309,120

Total assets

$

3,203,504

$

2,998,336

Deposits and Interest-bearing liabilities:
Interest bearing deposits

$

2,077,387

$

10,586

1.03

%

$

1,911,199

$

5,755

0.61

%

FHLB advances and other

 

60,710

 

580

1.93

%

 

73,092

 

601

1.66

%

Subordinated debentures

 

36,083

 

714

3.99

%

 

36,195

 

600

3.34

%

Notes payable

 

5,019

 

21

0.84

%

 

12,561

 

14

0.22

%

Total interest-bearing liabilities

 

2,179,199

 

11,901

1.10

%

 

2,033,047

 

6,970

0.69

%

Non-interest bearing deposits

 

582,722

 

-

-

 

 

549,735

 

-

-

 

Total including non-interest-bearing demand deposits

 

2,761,921

 

11,901

0.87

%

 

2,582,782

 

6,970

0.54

%

Other non-interest-bearing liabilities

 

44,708

 

37,975

Total liabilities

 

2,806,629

 

2,620,757

Stockholders' equity

 

396,875

 

377,579

Total liabilities and stockholders' equity

$

3,203,504

$

2,998,336

Net interest income; interest rate spread

$

57,755

3.76

%

$

52,723

3.79

%

Net interest margin (4)

4.03

%

3.95

%

Average interest-earning assets to average interest bearing liabilities

133

%

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 21%.

(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)

2nd Qtr 2019

 

1st Qtr 2019

 

4th Qtr 2018

 

3rd Qtr 2018

 

2nd Qtr 2018

Summary of Operations
Tax-equivalent interest income (1)

$

35,490

 

$

34,166

 

$

33,808

 

$

32,220

 

$

30,550

 

Interest expense

 

6,252

 

 

5,649

 

 

5,058

 

 

4,434

 

 

3,752

 

Tax-equivalent net interest income (1)

 

29,238

 

 

28,517

 

 

28,750

 

 

27,786

 

 

26,798

 

Provision for loan losses

 

282

 

 

212

 

 

472

 

 

1,376

 

 

423

 

Tax-equivalent NII after provision for loan losses (1)

 

28,956

 

 

28,305

 

 

28,278

 

 

26,410

 

 

26,375

 

Investment securities gains, net of impairment

 

-

 

 

-

 

 

97

 

 

76

 

 

-

 

Non-interest income (excluding securities gains/losses)

 

10,486

 

 

10,813

 

 

8,272

 

 

9,846

 

 

10,214

 

Non-interest expense

 

24,235

 

 

24,866

 

 

21,210

 

 

22,286

 

 

22,665

 

Income taxes

 

2,759

 

 

2,523

 

 

3,082

 

 

2,483

 

 

2,564

 

Net income

 

12,199

 

 

11,482

 

 

12,097

 

 

11,306

 

 

11,109

 

Tax equivalent adjustment (1)

 

249

 

 

247

 

 

258

 

 

257

 

 

251

 

At Period End
Total assets

$

3,277,552

 

$

3,221,249

 

$

3,181,722

 

$

3,098,093

 

$

3,039,589

 

Earning assets

 

2,980,243

 

 

2,934,860

 

 

2,898,471

 

 

2,810,624

 

 

2,756,712

 

Loans

 

2,624,219

 

 

2,548,968

 

 

2,540,039

 

 

2,456,357

 

 

2,385,344

 

Allowance for loan losses

 

28,934

 

 

28,164

 

 

28,331

 

 

27,639

 

 

27,321

 

Deposits

 

2,680,637

 

 

2,685,792

 

 

2,620,882

 

 

2,524,431

 

 

2,489,128

 

Stockholders’ equity

 

407,216

 

 

395,789

 

 

399,589

 

 

393,457

 

 

386,920

 

Stockholders’ equity / assets

 

12.42

%

 

12.29

%

 

12.56

%

 

12.70

%

 

12.73

%

Goodwill

 

98,569

 

 

98,569

 

 

98,569

 

 

98,569

 

 

98,569

 

Average Balances
Total assets

$

3,223,997

 

$

3,183,012

 

$

3,138,202

 

$

3,059,225

 

$

3,018,808

 

Earning assets

 

2,914,587

 

 

2,871,340

 

 

2,831,866

 

 

2,754,561

 

 

2,714,328

 

Loans

 

2,561,341

 

 

2,517,283

 

 

2,474,221

 

 

2,403,932

 

 

2,337,294

 

Deposits and interest-bearing liabilities

 

2,781,216

 

 

2,742,626

 

 

2,705,736

 

 

2,633,054

 

 

2,600,029

 

Deposits

 

2,678,060

 

 

2,642,158

 

 

2,594,635

 

 

2,513,708

 

 

2,487,430

 

Stockholders’ equity

 

398,612

 

 

395,138

 

 

392,701

 

 

389,361

 

 

381,165

 

Stockholders’ equity / assets

 

12.36

%

 

12.41

%

 

12.51

%

 

12.73

%

 

12.63

%

Per Common Share Data
Net Income:
Basic

$

0.62

 

$

0.57

 

$

0.60

 

$

0.55

 

$

0.54

 

Diluted

 

0.61

 

 

0.57

 

 

0.59

 

 

0.55

 

 

0.54

 

Dividends

 

0.19

 

 

0.19

 

 

0.17

 

 

0.17

 

 

0.15

 

Market Value:
High

$

30.44

 

$

31.30

 

$

31.09

 

$

35.00

 

$

33.72

 

Low

 

26.59

 

 

24.12

 

 

22.78

 

 

29.61

 

 

27.63

 

Close

 

28.57

 

 

28.74

 

 

24.51

 

 

30.11

 

 

33.53

 

Common Book Value

 

20.65

 

 

20.08

 

 

19.81

 

 

19.29

 

 

18.97

 

Shares outstanding, end of period (in thousands)

 

19,723

 

 

19,713

 

 

20,171

 

 

20,396

 

 

20,396

 

Performance Ratios (annualized)
Tax-equivalent net interest margin (1)

 

4.03

%

 

4.03

%

 

4.02

%

 

4.00

%

 

3.95

%

Return on average assets

 

1.52

%

 

1.46

%

 

1.53

%

 

1.47

%

 

1.48

%

Return on average equity

 

12.28

%

 

11.78

%

 

12.22

%

 

11.52

%

 

11.69

%

Efficiency ratio (2)

 

61.01

%

 

63.22

%

 

57.29

%

 

59.22

%

 

61.24

%

Effective tax rate

 

18.44

%

 

18.01

%

 

20.30

%

 

18.01

%

 

18.75

%

Common dividend payout ratio (basic)

 

30.65

%

 

33.33

%

 

28.33

%

 

30.91

%

 

27.78

%

(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%.

(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 2019

 

1st Qtr 2019

 

4th Qtr 2018

 

3rd Qtr 2018

 

2nd Qtr 2018

Loan Portfolio Composition
One to four family residential real estate

$

322,123

 

$

321,644

 

$

322,686

 

$

313,300

 

$

307,480

 

Construction

 

335,847

 

 

304,241

 

 

265,772

 

 

274,344

 

 

283,911

 

Commercial real estate

 

1,411,463

 

 

1,394,500

 

 

1,404,810

 

 

1,363,087

 

 

1,283,698

 

Commercial

 

530,528

 

 

509,627

 

 

509,577

 

 

489,393

 

 

489,296

 

Consumer finance

 

35,350

 

 

34,262

 

 

34,405

 

 

32,379

 

 

29,724

 

Home equity and improvement

 

125,860

 

 

124,450

 

 

128,152

 

 

129,295

 

 

129,868

 

Total loans

 

2,761,171

 

 

2,688,724

 

 

2,665,402

 

 

2,601,798

 

 

2,523,977

 

Less:
Undisbursed loan funds

 

134,794

 

 

137,742

 

 

123,293

 

 

143,286

 

 

136,563

 

Deferred loan origination fees

 

2,158

 

 

2,014

 

 

2,070

 

 

2,155

 

 

2,070

 

Allowance for loan loss

 

28,934

 

 

28,164

 

 

28,331

 

 

27,639

 

 

27,321

 

Net Loans

$

2,595,285

 

$

2,520,804

 

$

2,511,708

 

$

2,428,718

 

$

2,358,023

 

 
Allowance for loan loss activity
Beginning allowance

$

28,164

 

$

28,331

 

$

27,639

 

$

27,321

 

$

27,267

 

Provision for loan losses

 

282

 

 

212

 

 

472

 

 

1,376

 

 

423

 

Credit loss charge-offs:
One to four family residential real estate

 

11

 

 

172

 

 

31

 

 

136

 

 

78

 

Commercial real estate

 

15

 

 

0

 

 

30

 

 

1,048

 

 

254

 

Commercial

 

13

 

 

187

 

 

15

 

 

528

 

 

84

 

Consumer finance

 

33

 

 

142

 

 

105

 

 

25

 

 

72

 

Home equity and improvement

 

64

 

 

33

 

 

75

 

 

36

 

 

41

 

Total charge-offs

 

136

 

 

534

 

 

256

 

 

1,773

 

 

529

 

Total recoveries

 

624

 

 

155

 

 

476

 

 

715

 

 

160

 

Net charge-offs (recoveries)

 

(488

)

 

379

 

 

(220

)

 

1,058

 

 

369

 

Ending allowance

$

28,934

 

$

28,164

 

$

28,331

 

$

27,639

 

$

27,321

 

 
Credit Quality
Total non-performing loans (1)

$

15,334

 

$

17,645

 

$

19,016

 

$

20,929

 

$

18,340

 

Real estate owned (REO)

 

-

 

 

941

 

 

1,205

 

 

1,676

 

 

1,795

 

Total non-performing assets (2)

$

15,334

 

$

18,586

 

$

20,221

 

$

22,605

 

$

20,135

 

Net charge-offs (recoveries)

 

(488

)

 

379

 

 

(220

)

 

1,058

 

 

369

 

 
Restructured loans, accruing (3)

 

10,308

 

 

11,908

 

 

11,573

 

 

12,611

 

 

15,834

 

 
Allowance for loan losses / loans

 

1.10

%

 

1.10

%

 

1.12

%

 

1.13

%

 

1.15

%

Allowance for loan losses / non-performing assets

 

188.69

%

 

151.53

%

 

140.11

%

 

122.27

%

 

135.69

%

Allowance for loan losses / non-performing loans

 

188.69

%

 

159.61

%

 

148.99

%

 

132.06

%

 

148.97

%

Non-performing assets / loans plus REO

 

0.58

%

 

0.73

%

 

0.80

%

 

0.92

%

 

0.84

%

Non-performing assets / total assets

 

0.47

%

 

0.58

%

 

0.64

%

 

0.73

%

 

0.66

%

Net charge-offs / average loans (annualized)

 

-0.08

%

 

0.06

%

 

-0.04

%

 

0.18

%

 

0.06

%

 
Deposit Balances
Non-interest-bearing demand deposits

$

584,735

 

$

586,033

 

$

607,198

 

$

556,316

 

$

548,147

 

Interest-bearing demand deposits and money market

 

1,088,694

 

 

1,107,511

 

 

1,040,471

 

 

1,016,294

 

 

1,021,445

 

Savings deposits

 

304,051

 

 

300,244

 

 

292,829

 

 

293,359

 

 

297,870

 

Retail time deposits less than $250,000

 

610,345

 

 

601,012

 

 

591,822

 

 

564,379

 

 

547,871

 

Retail time deposits greater than $250,000

 

92,812

 

 

90,992

 

 

88,562

 

 

94,083

 

 

73,795

 

Total deposits

$

2,680,637

$

2,685,792

$

2,620,882

$

2,524,431

$

2,489,128

(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 days
past due
Non Accrual
Loans
 
June 30, 2019
One to four family residential real estate

$

322,123

$

317,671

$

1,258

$

3,194

Construction

 

335,847

 

335,847

 

-

 

-

Commercial real estate

 

1,411,463

 

1,403,096

 

134

 

8,233

Commercial

 

530,528

 

527,023

 

168

 

3,337

Consumer finance

 

35,350

 

35,099

 

231

 

20

Home equity and improvement

 

125,860

 

124,215

 

1,095

 

550

Total loans

$

2,761,171

$

2,742,951

$

2,886

$

15,334

 
December 31, 2018
One to four family residential real estate

$

322,686

$

317,740

$

1,306

$

3,640

Construction

 

265,772

 

265,772

 

-

 

-

Commercial real estate

 

1,404,810

 

1,394,211

 

242

 

10,357

Commercial

 

509,577

 

504,884

 

193

 

4,500

Consumer finance

 

34,405

 

34,079

 

200

 

126

Home equity and improvement

 

128,152

 

126,188

 

1,571

 

393

Total loans

$

2,665,402

$

2,642,874

$

3,512

$

19,016

 
June 30, 2018
One to four family residential real estate

$

307,480

$

303,263

$

1,806

$

2,411

Construction

 

283,911

 

283,911

 

-

 

-

Commercial real estate

 

1,283,698

 

1,273,236

 

222

 

10,240

Commercial

 

489,296

 

483,574

 

577

 

5,145

Consumer finance

 

29,724

 

29,438

 

221

 

65

Home equity and improvement

 

129,868

 

128,234

 

1,155

 

479

Total loans

$

2,523,977

$

2,501,656

$

3,981

$

18,340

 

Contacts

Donald P. Hileman
President and CEO
(419) 782-5104
dhileman@first-fed.com

Release Summary

First Defiance Financial Corp. Announces 2019 Second Quarter Earnings

Contacts

Donald P. Hileman
President and CEO
(419) 782-5104
dhileman@first-fed.com