First Defiance Financial Corp. Announces 2011 Second Quarter Earnings
DEFIANCE, Ohio, July 25, 2011 /PRNewswire/ --
- Net Income of $4.8 million for 2011 second quarter, up from $2.1 million in the second quarter of 2010
- Provision for Loan Losses of $2.4 million, down from $5.4 million in the second quarter of 2010
- Net Interest Margin of 3.86%, down from 2010 second quarter of 3.89%
First Defiance Financial Corp. (NASDAQ: FDEF) announced today that net income for its second quarter ended June 30, 2011 totaled $4.8 million, or $0.43 per diluted common share, compared to $2.1 million or $0.19 per diluted common share for the quarter ended June 30, 2010.
"The second quarter saw progress in several areas, even as we navigate through a tenuous economic operating environment," said William J. Small, Chairman, President, and Chief Executive Officer of First Defiance Financial Corp. "We were pleased with the overall performance in the quarter, including improvement in the level of non-performing loans as well as the decline in credit related costs."
Credit Quality
The second quarter results include expense for provision for loan losses of $2.4 million, compared with $5.4 million for the same period in 2010 and $2.8 million in the first quarter of 2011.
Non-performing loans totaled $40.8 million at June 30, 2011, a decrease of $4.8 million or 11% from $45.6 million at March 31, 2011, and basically flat with June 30, 2010. The June 30, 2011 balance included $34.5 million of loans that are on non-accrual and another $6.2 million of loans that are still accruing, but are considered non-performing because of changes in terms granted to borrowers. In addition, First Defiance had $7.4 million of real estate owned at June 30, 2011, a decrease of $1.8 million or 19% from $9.2 million at March 31, 2011 and down from $12.7 million at June 30, 2010. For the second quarter of 2011, First Defiance recorded net charge-offs of $2.7 million, which when annualized, represented 0.75% of average loans outstanding at June 30, 2011, down from the first quarter level of 0.85%. The allowance for loan loss as a percentage of total loans increased slightly to 2.80% at June 30, 2011 from 2.70% at December 31, 2010 and 2.47% at June 30, 2010.
"We are encouraged with the trend in the net charge offs over the last several quarters," Small said. "The stabilization of the net charge offs, as well as improvements in overall credit quality, has led to lower provisions for loan loss than we have been experiencing. Our nonperforming assets and real estate owned balances are now lower than they were at the beginning of 2009, and we are focused on driving them even lower."
Net Interest Margin down slightly from 2010 Second Quarter
Net interest income was $17.5 million in the second quarter of 2011 compared to $17.6 million in the 2010 second quarter. Net interest margin was 3.86% for the 2011 second quarter compared to 3.89% in both the first quarter of 2011 and the second quarter of 2010. The cost of interest-bearing liabilities and non-interest-bearing demand deposits decreased by 51 basis points, to 1.00% from 1.51%, but this was offset by a decline in the yield on interest earning assets of 53 basis points, to 4.83% in the second quarter of 2011 from 5.36% in the 2010 second quarter
"Despite the fact that we are seeing promising signs of economic recovery in our markets, the challenges on net interest margin are far from over," said Small. "The continued low rate environment adds to the challenge of increasing net interest margin."
Non-Interest Income
First Defiance's non-interest income for the 2011 second quarter was $6.8 million compared with $5.8 million in the second quarter of 2010. Service fees and other charges were $2.7 million in the second quarter of 2011, compared with $3.4 million in the second quarter of 2010. NSF income was $1.5 million in the second quarter of 2011, down $502,000 from the second quarter of 2010. Other non-interest income increased to $130,000 in the second quarter of 2011 from a loss of $223,000 for the same period of 2010. This was the result of recording net gains of $38,000 on real estate owned sales in the second quarter of 2011 compared to net losses of $207,000 for the same period in 2010. Mortgage banking income increased to $1.9 million in the second quarter of 2011 from $985,000 in the second quarter of 2010. Gains from the sale of mortgage loans decreased in the second quarter of 2011 to $1.1 million from $1.2 million in the second quarter of 2010. Mortgage loan servicing revenue increased to $832,000 in the 2011 second quarter from $754,000 in the second quarter of 2010.
The second quarter saw reduced originations and also triggered recovery of previously recorded mortgage servicing rights ("MSR") impairment. First Defiance had a positive change in the valuation adjustment in mortgage servicing assets of $316,000 in the second quarter of 2011, compared with a negative valuation adjustment of $571,000 in the second quarter of 2010. The positive MSR valuation adjustment is a reflection of the increase in the fair value of certain sectors of the Company's portfolio of MSRs for these periods. The interest rate environment that gives rise to decreased mortgage origination activity also typically causes decreases in MSR amortization and impairment, creating a natural hedge in the mortgage banking line of business.
Income from the sale of insurance and investment products increased to $1.4 million for the 2011 second quarter, from $1.3 million in the same period of 2010.
"We are pleased with the overall increase in non-interest income in 2011 compared to 2010," said Small. "We have been able to manage through the ongoing pressure on fee income by increasing other sources of non-interest income."
Non-Interest Expenses
Total non-interest expense was $15.1 million for the second quarter of 2011, relatively flat with the second quarter of 2010.
Compensation and benefits were $7.5 million, compared to $6.6 million in the second quarter of 2010 and $7.8 million in the first quarter of 2011. The year over year increase in compensation and benefits expense is largely due to the Company freezing pay in 2010, coupled with no bonuses being paid in the second quarter of 2010 because certain targets were not met. The Company increased compensation late in the first quarter of 2011 and accrued for bonus payments based on 2011 performance. FDIC insurance expense decreased to $677,000 in the second quarter of 2011 due to Dodd-Frank regulations from $929,000 in the same period of 2010. Other non-interest expense decreased to $3.2 million in the second quarter of 2011 from $3.8 million in the second quarter of 2010. Credit, collection and real estate owned costs were $956,000 in the second quarter of 2011 compared to $1.1 million in the same period of 2010.
Year-To-Date Results
For the six month period ended June 30, 2011, net interest income totaled $34.7 million, compared with $34.6 million in the first six months of 2010. Average interest-earning assets increased to $1.844 billion for the first half of 2011, compared to $1.839 billion for the first half of 2010. Net interest margin for the first six months of 2011 was 3.89%, up 2 basis points from the 3.87% margin reported in the six month period ended June 30, 2010.
The provision for loan losses for the first half of 2011 was $5.2 million, compared to $12.3 million recorded during the first six months of 2010.
Non-interest income for the first half of 2011 was $12.8 million, compared to $12.6 million during the same period of 2010. Service fees and other charges were $5.4 million for the first half of 2011, compared to $6.6 million during the first half of 2010. Mortgage banking income increased to $3.2 million in the first half of 2011, compared with $2.8 million in the first half of 2010. Insurance and investment sales revenues increased to $3.1 million for the first half of 2011, compared with $2.4 million during the first half of 2010. Non-interest income for the first half of 2011 was reduced by $2,000 of other-than-temporary impairment charges recognized for impaired investment securities compared with $141,000 in the first half of 2010.
Non-interest expense increased to $31.7 million for the first six months of 2011 from $29.9 million in the first half of 2010. Occupancy costs were $3.6 million in the first half of 2011 compared with $3.5 million in the first half of 2010. Credit, collection and real estate owned costs have decreased $199,000 in the first six months of 2011 over the first six months of 2010.
"These continue to be very challenging times which are compounded by the financial debate taking place in Washington," said Small. "We are confident in our ability to meet the challenges, and we are keeping a watchful eye on the federal government initiatives that are coming down the road. Right now, we want to stay the course as much as possible and be prepared to react to any new legislation or regulations."
Total Assets at $2.05 Billion
Total assets at June 30, 2011 were $2.05 billion, compared to $2.04 billion at December 31, 2010 and June 30, 2010. Net loans receivable (excluding loans held for sale) were $1.41 billion at June 30, 2011, compared to $1.48 billion at December 31, 2010 and $1.53 billion at June 30, 2010. Total cash and cash equivalents were $213.8 million at June 30, 2011, compared with $169.2 million at December 31, 2010 and $122.1 million at June 30, 2010. Also at June 30, 2011, goodwill and other intangible assets totaled $63.0 million, compared to $63.7 million at December 31, 2010 and $64.4 million at June 30, 2010.
Total deposits at June 30, 2011 were $1.57 billion compared with $1.58 billion at December 31, 2010 and June 30, 2010. Non-interest bearing deposits at June 30, 2011 were $225.9 million, compared to $216.7 million at December 31, 2010 and $190.1 million at June 30, 2010. Total stockholders' equity was $269.1 million at June 30, 2011, compared to $240.3 million at December 31, 2010 and $238.4 million at June 30, 2010.
Conference Call
First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EST) on Tuesday, July 26, 2011 to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-317-6789. A live webcast may be accessed at https://services.choruscall.com/links/fdef110726.html .
Audio replay of the Internet Web cast will be available at www.fdef.com until August 31, 2011 at 9:00 a.m.
First Defiance Financial Corp.
First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance & Investments. First Federal operates 33 full service branches and 45 ATM locations in northwest Ohio, southeast Michigan and Fort Wayne, Indiana. First Insurance & Investments specializes in property and casualty and group health and life insurance, with six 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 of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission (SEC) filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2010. One or more of these factors have affected or could in the future affect the Company's business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.
Consolidated Balance Sheets |
|||||
First Defiance Financial Corp. |
|||||
(Unaudited) |
|||||
June 30, |
December 31, |
June 30, |
|||
(in thousands) |
2011 |
2010 |
2010 |
||
Assets |
|||||
Cash and cash equivalents |
|||||
Cash and amounts due from depository institutions |
$ 28,817 |
$ 24,977 |
$ 33,528 |
||
Interest-bearing deposits |
185,000 |
144,187 |
88,544 |
||
213,817 |
169,164 |
122,072 |
|||
Securities |
|||||
Available-for sale, carried at fair value |
211,702 |
165,252 |
159,131 |
||
Held-to-maturity, carried at amortized cost |
770 |
839 |
1,836 |
||
212,472 |
166,091 |
160,967 |
|||
Loans |
1,449,010 |
1,519,503 |
1,571,413 |
||
Allowance for loan losses |
(40,530) |
(41,080) |
(38,852) |
||
Loans, net |
1,408,480 |
1,478,423 |
1,532,561 |
||
Loans held for sale |
12,697 |
18,127 |
16,000 |
||
Mortgage servicing rights |
9,839 |
9,477 |
8,720 |
||
Accrued interest receivable |
6,208 |
6,374 |
6,973 |
||
Federal Home Loan Bank stock |
20,655 |
21,012 |
21,376 |
||
Bank Owned Life Insurance |
35,453 |
34,979 |
30,767 |
||
Office properties and equipment |
40,445 |
41,743 |
42,378 |
||
Real estate and other assets held for sale |
7,388 |
9,591 |
12,735 |
||
Goodwill |
57,556 |
57,556 |
57,556 |
||
Core deposit and other intangibles |
5,464 |
6,128 |
6,841 |
||
Deferred taxes |
4,507 |
5,805 |
3,495 |
||
Other assets |
10,709 |
11,047 |
16,215 |
||
Total Assets |
$ 2,045,690 |
$ 2,035,517 |
$ 2,038,656 |
||
Liabilities and Stockholders’ Equity |
|||||
Non-interest-bearing deposits |
$ 225,869 |
$ 216,699 |
$ 190,140 |
||
Interest-bearing deposits |
1,347,631 |
1,358,720 |
1,390,380 |
||
Total deposits |
1,573,500 |
1,575,419 |
1,580,520 |
||
Advances from Federal Home Loan Bank |
96,863 |
116,885 |
126,906 |
||
Notes payable and other interest-bearing liabilities |
50,847 |
56,247 |
44,702 |
||
Subordinated debentures |
36,083 |
36,083 |
36,083 |
||
Advance payments by borrowers for tax and insurance |
1,074 |
937 |
379 |
||
Other liabilities |
18,184 |
9,615 |
11,628 |
||
Total liabilities |
1,776,551 |
1,795,186 |
1,800,218 |
||
Stockholders’ Equity |
|||||
Preferred stock, net of discount |
36,549 |
36,463 |
36,375 |
||
Common stock, net |
127 |
127 |
127 |
||
Common stock warrant |
878 |
878 |
878 |
||
Additional paid-in-capital |
135,547 |
140,845 |
140,767 |
||
Accumulated other comprehensive income (loss) |
2,031 |
(342) |
1,460 |
||
Retained earnings |
141,386 |
134,988 |
131,459 |
||
Treasury stock, at cost |
(47,379) |
(72,628) |
(72,628) |
||
Total stockholders’ equity |
269,139 |
240,331 |
238,438 |
||
Total Liabilities and Stockholders’ Equity |
$ 2,045,690 |
$ 2,035,517 |
$ 2,038,656 |
||
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) |
2011 |
2010 |
2011 |
2010 |
||||
Interest Income: |
||||||||
Loans |
$ 19,841 |
$ 22,477 |
$ 40,065 |
$ 44,874 |
||||
Investment securities |
1,768 |
1,569 |
3,366 |
3,021 |
||||
Interest-bearing deposits |
140 |
69 |
241 |
130 |
||||
FHLB stock dividends |
224 |
234 |
459 |
453 |
||||
Total interest income |
21,973 |
24,349 |
44,131 |
48,478 |
||||
Interest Expense: |
||||||||
Deposits |
3,263 |
5,126 |
6,857 |
10,524 |
||||
FHLB advances and other |
768 |
1,220 |
1,674 |
2,438 |
||||
Subordinated debentures |
286 |
327 |
612 |
650 |
||||
Notes Payable |
140 |
115 |
270 |
220 |
||||
Total interest expense |
4,457 |
6,788 |
9,413 |
13,832 |
||||
Net interest income |
17,516 |
17,561 |
34,718 |
34,646 |
||||
Provision for loan losses |
2,405 |
5,440 |
5,238 |
12,329 |
||||
Net interest income after provision for loan losses |
15,111 |
12,121 |
29,480 |
22,317 |
||||
Non-interest Income: |
||||||||
Service fees and other charges |
2,747 |
3,397 |
5,364 |
6,555 |
||||
Mortgage banking income |
1,906 |
985 |
3,194 |
2,792 |
||||
Gain on sale of non-mortgage loans |
195 |
50 |
299 |
87 |
||||
Gain on sale of securities |
- |
- |
49 |
6 |
||||
Impairment on securities |
- |
(71) |
(2) |
(141) |
||||
Insurance and investment sales commissions |
1,449 |
1,309 |
3,104 |
2,417 |
||||
Trust income |
174 |
132 |
322 |
254 |
||||
Income from Bank Owned Life Insurance |
237 |
212 |
474 |
691 |
||||
Other non-interest income |
130 |
(223) |
(21) |
(103) |
||||
Total Non-interest Income |
6,838 |
5,791 |
12,783 |
12,558 |
||||
Non-interest Expense: |
||||||||
Compensation and benefits |
7,451 |
6,589 |
15,285 |
13,047 |
||||
Occupancy |
1,792 |
1,701 |
3,644 |
3,529 |
||||
FDIC insurance premium |
677 |
929 |
1,590 |
1,975 |
||||
State franchise tax |
542 |
516 |
1,084 |
1,079 |
||||
Data processing |
979 |
1,174 |
2,040 |
2,370 |
||||
Amortization of intangibles |
320 |
345 |
664 |
783 |
||||
One time acquisition related charges |
135 |
37 |
135 |
37 |
||||
Other non-interest expense |
3,190 |
3,754 |
7,271 |
7,057 |
||||
Total Non-interest Expense |
15,086 |
15,045 |
31,713 |
29,877 |
||||
Income before income taxes |
6,863 |
2,867 |
10,550 |
4,998 |
||||
Income taxes |
2,113 |
808 |
3,140 |
1,432 |
||||
Net Income |
$ 4,750 |
$ 2,059 |
$ 7,410 |
$ 3,566 |
||||
Dividends Accrued on Preferred Shares |
(463) |
(462) |
(925) |
(925) |
||||
Accretion on Preferred Shares |
(44) |
(42) |
(86) |
(82) |
||||
Net Income Applicable to Common Shares |
$ 4,243 |
$ 1,555 |
$ 6,399 |
$ 2,559 |
||||
Earnings per common share: |
||||||||
Basic |
$ 0.44 |
$ 0.19 |
$ 0.71 |
$ 0.32 |
||||
Diluted |
$ 0.43 |
$ 0.19 |
$ 0.70 |
$ 0.31 |
||||
Average Shares Outstanding: |
||||||||
Basic |
9,724 |
8,118 |
9,006 |
8,118 |
||||
Diluted |
9,902 |
8,193 |
9,171 |
8,169 |
||||
Financial Summary and Comparison |
||||||||
First Defiance Financial Corp. |
||||||||
(Unaudited) |
(Unaudited) |
|||||||
Three Months Ended |
Six Months Ended |
|||||||
June 30, |
June 30, |
|||||||
(dollars in thousands, except per share data) |
2011 |
2010 |
% change |
2011 |
2010 |
% change |
||
Summary of Operations |
||||||||
Tax-equivalent interest income (1) |
$ 22,337 |
$ 24,655 |
(9.4)% |
$ 44,838 |
$ 49,082 |
(8.6)% |
||
Interest expense |
4,457 |
6,788 |
(34.3) |
9,413 |
13,832 |
(31.9) |
||
Tax-equivalent net interest income (1) |
17,880 |
17,867 |
0.1 |
35,425 |
35,250 |
0.5 |
||
Provision for loan losses |
2,405 |
5,440 |
(55.8) |
5,238 |
12,329 |
(57.5) |
||
Tax-equivalent NII after provision for loan loss (1) |
15,475 |
12,427 |
24.5 |
30,187 |
22,921 |
31.7 |
||
Investment Securities gains (losses) |
- |
- |
- |
49 |
5 |
880.0 |
||
Impairment losses on securities |
- |
(71) |
(100.0) |
(2) |
(140) |
(98.6) |
||
Non-interest income-excluding securities gains |
6,838 |
5,862 |
16.6 |
12,736 |
12,693 |
0.3 |
||
Non-interest expense |
15,086 |
15,045 |
0.3 |
31,713 |
29,877 |
6.1 |
||
Income taxes |
2,113 |
808 |
161.5 |
3,140 |
1,432 |
119.3 |
||
Net Income |
4,750 |
2,059 |
130.7 |
7,410 |
3,566 |
107.8 |
||
Dividends Declared on Preferred Shares |
(463) |
(462) |
0.2 |
(925) |
(925) |
- |
||
Accretion on Preferred Shares |
(44) |
(42) |
4.8 |
(86) |
(82) |
4.9 |
||
Net Income Applicable to Common Shares |
4,243 |
1,555 |
172.9 |
6,399 |
2,559 |
150.1 |
||
Tax equivalent adjustment (1) |
364 |
306 |
19.0 |
707 |
604 |
17.1 |
||
At Period End |
||||||||
Assets |
2,045,690 |
2,038,656 |
0.3 |
|||||
Earning assets |
1,879,834 |
1,858,300 |
1.2 |
|||||
Loans |
1,449,010 |
1,571,413 |
(7.8) |
|||||
Allowance for loan losses |
40,530 |
38,852 |
4.3 |
|||||
Deposits |
1,573,500 |
1,580,520 |
(0.4) |
|||||
Stockholders’ equity |
269,139 |
238,438 |
12.9 |
|||||
Average Balances |
||||||||
Assets |
2,065,100 |
2,060,925 |
0.2 |
2,054,744 |
2,054,716 |
0.0 |
||
Earning assets |
1,858,636 |
1,845,306 |
0.7 |
1,843,775 |
1,838,587 |
0.3 |
||
Deposits and interest-bearing liabilities |
1,781,746 |
1,808,944 |
(1.5) |
1,560,863 |
1,803,674 |
(13.5) |
||
Loans |
1,431,792 |
1,551,396 |
(7.7) |
1,444,764 |
1,555,901 |
(7.1) |
||
Deposits |
1,591,786 |
1,597,820 |
(0.4) |
1,591,201 |
1,586,979 |
0.3 |
||
Stockholders’ equity |
266,544 |
237,076 |
12.4 |
254,035 |
236,283 |
7.5 |
||
Stockholders’ equity / assets |
12.91% |
11.50% |
12.2 |
12.36% |
11.50% |
7.5 |
||
Per Common Share Data |
||||||||
Net Income |
||||||||
Basic |
$ 0.44 |
$ 0.19 |
131.6 |
$ 0.71 |
$ 0.32 |
121.9 |
||
Diluted |
0.43 |
0.19 |
126.3 |
0.70 |
0.31 |
125.8 |
||
Dividends |
- |
- |
- |
- |
- |
- |
||
Market Value: |
||||||||
High |
$ 15.00 |
$ 14.85 |
1.0 |
$ 15.00 |
$ 14.85 |
1.0 |
||
Low |
13.22 |
8.53 |
55.0 |
11.89 |
8.53 |
39.4 |
||
Close |
14.69 |
8.94 |
64.3 |
14.69 |
8.94 |
64.3 |
||
Common Book Value |
23.83 |
24.78 |
(3.9) |
23.83 |
24.78 |
(3.9) |
||
Tangible Common Book Value |
17.35 |
16.85 |
2.9 |
17.35 |
16.85 |
2.9 |
||
Shares outstanding, end of period (000) |
9,724 |
8,118 |
19.8 |
9,724 |
8,118 |
19.8 |
||
Performance Ratios (annualized) |
||||||||
Tax-equivalent net interest margin (1) |
3.86% |
3.89% |
(0.6) |
3.89% |
3.87% |
0.5 |
||
Return on average assets |
0.92% |
0.40% |
130.2 |
0.73% |
0.35% |
107.8 |
||
Return on average equity |
7.15% |
3.48% |
105.2 |
5.88% |
3.04% |
93.3 |
||
Efficiency ratio (2) |
61.03% |
63.40% |
(3.7) |
65.85% |
62.32% |
5.7 |
||
Effective tax rate |
30.79% |
28.18% |
9.2 |
29.76% |
28.65% |
3.9 |
||
Dividend payout ratio (basic) |
0.00% |
0.00% |
- |
0.00% |
0.00% |
- |
||
(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 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) |
2011 |
2010 |
2011 |
2010 |
||
Gain from sale of mortgage loans |
$ 1,100 |
$ 1,212 |
$ 1,826 |
$ 2,376 |
||
Mortgage loan servicing revenue (expense): |
||||||
Mortgage loan servicing revenue |
832 |
754 |
1,677 |
1,502 |
||
Amortization of mortgage servicing rights |
(342) |
(410) |
(796) |
(836) |
||
Mortgage servicing rights valuation adjustments |
316 |
(571) |
487 |
(250) |
||
806 |
(227) |
1,368 |
416 |
|||
Total revenue from sale and servicing of mortgage loans |
$ 1,906 |
$ 985 |
$ 3,194 |
$ 2,792 |
||
Yield Analysis |
||||||||||||
First Defiance Financial Corp. |
||||||||||||
Three Months Ended June 30, |
||||||||||||
(dollars in thousands) |
||||||||||||
2011 |
2010 |
|||||||||||
Average |
Yield |
Average |
Yield |
|||||||||
Balance |
Interest(1) |
Rate(2) |
Balance |
Interest(1) |
Rate(2) |
|||||||
Interest-earning assets: |
||||||||||||
Loans receivable |
$ 1,431,792 |
$ 19,874 |
5.57% |
$ 1,551,396 |
$ 22,514 |
5.82% |
||||||
Securities |
195,790 |
2,099 |
4.36% |
156,263 |
1,838 |
4.78% |
||||||
Interest Bearing Deposits |
210,050 |
140 |
0.27% |
116,271 |
69 |
0.24% |
||||||
FHLB stock |
21,004 |
224 |
4.28% |
21,376 |
234 |
4.39% |
||||||
Total interest-earning assets |
1,858,636 |
22,337 |
4.83% |
1,845,306 |
24,655 |
5.36% |
||||||
Non-interest-earning assets |
206,464 |
215,619 |
||||||||||
Total assets |
$ 2,065,100 |
$ 2,060,925 |
||||||||||
Deposits and Interest-bearing liabilities: |
||||||||||||
Interest bearing deposits |
$ 1,363,700 |
$ 3,263 |
0.96% |
$ 1,404,202 |
$ 5,126 |
1.46% |
||||||
FHLB advances and other |
96,934 |
768 |
3.18% |
126,910 |
1,220 |
3.86% |
||||||
Other Borrowings |
56,796 |
140 |
0.99% |
47,986 |
115 |
0.96% |
||||||
Subordinated debentures |
36,230 |
286 |
3.17% |
36,228 |
327 |
3.62% |
||||||
Total interest-bearing liabilities |
1,553,660 |
4,457 |
1.15% |
1,615,326 |
6,788 |
1.69% |
||||||
Non-interest bearing deposits |
228,086 |
- |
- |
193,618 |
- |
- |
||||||
Total including non-interest-bearing demand deposits |
1,781,746 |
4,457 |
1.00% |
1,808,944 |
6,788 |
1.51% |
||||||
Other non-interest-bearing liabilities |
16,810 |
14,905 |
||||||||||
Total liabilities |
1,798,556 |
1,823,849 |
||||||||||
Stockholders' equity |
266,544 |
237,076 |
||||||||||
Total liabilities and stockholders' equity |
$ 2,065,100 |
$ 2,060,925 |
||||||||||
Net interest income; interest rate spread |
$ 17,880 |
3.68% |
$ 17,867 |
3.67% |
||||||||
Net interest margin (3) |
3.86% |
3.89% |
||||||||||
Average interest-earning assets to average interest bearing liabilities |
120% |
114% |
||||||||||
Six Months Ended June 30, |
||||||||||||
(dollars in thousands) |
||||||||||||
2011 |
2010 |
|||||||||||
Average |
Yield |
Average |
Yield |
|||||||||
Balance |
Interest(1) |
Rate(2) |
Balance |
Interest(1) |
Rate(2) |
|||||||
Interest-earning assets: |
||||||||||||
Loans receivable |
$ 1,444,764 |
$ 40,131 |
5.62% |
$ 1,555,901 |
$ 44,950 |
5.83% |
||||||
Securities |
183,439 |
4,007 |
4.46% |
148,955 |
3,549 |
4.86% |
||||||
Interest Bearing Deposits |
194,564 |
241 |
0.25% |
112,355 |
130 |
0.23% |
||||||
FHLB stock |
21,008 |
459 |
4.42% |
21,376 |
453 |
4.27% |
||||||
Total interest-earning assets |
1,843,775 |
44,838 |
4.92% |
1,838,587 |
49,082 |
5.38% |
||||||
Non-interest-earning assets |
210,969 |
216,129 |
||||||||||
Total assets |
$ 2,054,744 |
$ 2,054,716 |
||||||||||
Deposits and Interest-bearing liabilities: |
||||||||||||
Interest bearing deposits |
$ 1,366,853 |
$ 6,857 |
1.01% |
$ 1,398,073 |
$ 10,524 |
1.52% |
||||||
FHLB advances and other |
102,342 |
1,674 |
3.31% |
134,334 |
2,438 |
3.66% |
||||||
Other Borrowings |
55,438 |
270 |
0.98% |
46,133 |
220 |
0.96% |
||||||
Subordinated debentures |
36,230 |
612 |
3.42% |
36,228 |
650 |
3.62% |
||||||
Total interest-bearing liabilities |
1,560,863 |
9,413 |
1.22% |
1,614,768 |
13,832 |
1.72% |
||||||
Non-interest bearing deposits |
224,348 |
- |
- |
188,906 |
- |
- |
||||||
Total including non-interest-bearing demand deposits |
1,785,211 |
9,413 |
1.07% |
1,803,674 |
13,832 |
1.55% |
||||||
Other non-interest-bearing liabilities |
15,498 |
14,759 |
||||||||||
Total liabilities |
1,800,709 |
1,818,433 |
||||||||||
Stockholders' equity |
254,035 |
236,283 |
||||||||||
Total liabilities and stockholders' equity |
$ 2,054,744 |
$ 2,054,716 |
||||||||||
Net interest income; interest rate spread |
$ 35,425 |
3.70% |
$ 35,250 |
3.66% |
||||||||
Net interest margin (3) |
3.89% |
3.87% |
||||||||||
Average interest-earning assets to average interest bearing liabilities |
118% |
114% |
||||||||||
(1) Interest on certain tax exempt loans and securities is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 35%. |
||||||||||||
(2) Annualized |
||||||||||||
(3) Net interest margin is net interest income divided by average interest-earning assets. |
||||||||||||
Selected Quarterly Information |
||||||
First Defiance Financial Corp. |
||||||
(dollars in thousands, except per share data) |
2nd Qtr 2011 |
1st Qtr 2011 |
4th Qtr 2010 |
3rd Qtr 2010 |
2nd Qtr 2010 |
|
Summary of Operations |
||||||
Tax-equivalent interest income (1) |
$ 22,337 |
$ 22,501 |
$ 23,651 |
$ 24,373 |
$ 24,655 |
|
Interest expense |
4,457 |
4,956 |
5,574 |
6,295 |
6,788 |
|
Tax-equivalent net interest income (1) |
17,880 |
17,545 |
18,077 |
18,078 |
17,867 |
|
Provision for loan losses |
2,405 |
2,833 |
5,652 |
5,196 |
5,440 |
|
Tax-equivalent NII after provision for loan losses (1) |
15,475 |
14,712 |
12,425 |
12,882 |
12,427 |
|
Investment securities gains (losses), including impairment |
- |
47 |
(14) |
(190) |
(71) |
|
Non-interest income (excluding securities gains/losses) |
6,838 |
5,898 |
7,568 |
7,669 |
5,862 |
|
Non-interest expense |
15,086 |
16,626 |
16,485 |
17,102 |
15,045 |
|
Income taxes |
2,113 |
1,028 |
904 |
668 |
808 |
|
Net income |
4,750 |
2,660 |
2,268 |
2,275 |
2,059 |
|
Dividends Declared on Preferred Shares |
(463) |
(462) |
(463) |
(463) |
(462) |
|
Accretion on Preferred Shares |
(44) |
(43) |
(43) |
(43) |
(42) |
|
Net Income (Loss) Applicable to Common Shares |
4,243 |
2,155 |
1,762 |
1,769 |
1,555 |
|
Tax equivalent adjustment (1) |
364 |
343 |
322 |
316 |
306 |
|
At Period End |
||||||
Total assets |
$ 2,045,690 |
$ 2,061,952 |
$ 2,035,517 |
$ 2,042,239 |
$ 2,038,656 |
|
Earning assets |
1,879,834 |
1,892,970 |
1,867,733 |
1,866,939 |
1,858,300 |
|
Loans |
1,449,010 |
1,471,209 |
1,519,503 |
1,549,677 |
1,571,413 |
|
Allowance for loan losses |
40,530 |
40,798 |
41,080 |
41,343 |
38,852 |
|
Deposits |
1,573,500 |
1,592,046 |
1,575,419 |
1,590,648 |
1,580,520 |
|
Stockholders’ equity |
269,139 |
263,145 |
240,331 |
241,029 |
238,438 |
|
Stockholders’ equity / assets |
13.16% |
12.76% |
11.81% |
11.80% |
11.70% |
|
Goodwill |
57,556 |
57,556 |
57,556 |
57,556 |
57,556 |
|
Average Balances |
||||||
Total assets |
$ 2,065,100 |
$ 2,044,387 |
$ 2,063,965 |
$ 2,045,835 |
$ 2,060,925 |
|
Earning assets |
1,858,636 |
1,828,916 |
1,844,206 |
1,823,911 |
1,845,306 |
|
Deposits and interest-bearing liabilities |
1,781,746 |
1,788,677 |
1,805,620 |
1,790,022 |
1,808,944 |
|
Loans |
1,431,792 |
1,457,736 |
1,496,374 |
1,545,378 |
1,551,396 |
|
Deposits |
1,591,786 |
1,590,617 |
1,601,516 |
1,585,300 |
1,597,820 |
|
Stockholders’ equity |
266,544 |
241,525 |
241,902 |
240,709 |
237,076 |
|
Stockholders’ equity / assets |
12.91% |
11.81% |
11.72% |
11.77% |
11.50% |
|
Per Common Share Data |
||||||
Net Income: |
||||||
Basic |
$ 0.44 |
$ 0.25 |
$ 0.22 |
$ 0.22 |
$ 0.19 |
|
Diluted |
0.43 |
0.25 |
0.22 |
0.22 |
0.19 |
|
Dividends |
- |
- |
- |
- |
- |
|
Market Value: |
||||||
High |
$ 15.00 |
$ 14.64 |
$ 12.32 |
$ 10.63 |
$ 14.85 |
|
Low |
13.22 |
11.89 |
9.94 |
8.55 |
8.53 |
|
Close |
14.69 |
14.34 |
11.90 |
10.06 |
8.94 |
|
Book Value |
23.83 |
23.22 |
25.00 |
25.10 |
24.78 |
|
Shares outstanding, end of period (in thousands) |
9,724 |
9,724 |
8,118 |
8,118 |
8,118 |
|
Performance Ratios (annualized) |
||||||
Tax-equivalent net interest margin (1) |
3.86% |
3.89% |
3.89% |
3.94% |
3.89% |
|
Return on average assets |
0.92% |
0.53% |
0.44% |
0.44% |
0.40% |
|
Return on average equity |
7.15% |
4.47% |
3.72% |
3.75% |
3.48% |
|
Efficiency ratio (2) |
61.03% |
70.92% |
64.28% |
66.42% |
63.40% |
|
Effective tax rate |
30.79% |
27.87% |
28.50% |
22.70% |
28.18% |
|
Common dividend payout ratio (basic) |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
(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 2011 |
1st Qtr 2011 |
4th Qtr 2010 |
3rd Qtr 2010 |
2nd Qtr 2010 |
|||||
Loan Portfolio Composition |
||||||||||
One to four family residential real estate |
$ 213,034 |
$ 218,599 |
$ 205,938 |
$ 213,574 |
$ 217,603 |
|||||
Construction |
23,893 |
24,437 |
30,340 |
31,722 |
43,333 |
|||||
Commercial real estate |
735,212 |
746,899 |
767,012 |
776,972 |
790,521 |
|||||
Commercial |
336,598 |
341,614 |
369,959 |
372,583 |
364,281 |
|||||
Consumer finance |
20,384 |
20,862 |
22,848 |
27,060 |
28,961 |
|||||
Home equity and improvement |
127,962 |
128,810 |
133,593 |
137,747 |
140,969 |
|||||
Total loans |
1,457,083 |
1,481,221 |
1,529,690 |
1,559,658 |
1,585,668 |
|||||
Less: |
||||||||||
Loans in process |
7,257 |
9,160 |
9,267 |
9,030 |
13,283 |
|||||
Deferred loan origination fees |
816 |
852 |
920 |
951 |
972 |
|||||
Allowance for loan loss |
40,530 |
40,798 |
41,080 |
41,343 |
38,852 |
|||||
Net Loans |
$ 1,408,480 |
$ 1,430,411 |
$ 1,478,423 |
$ 1,508,334 |
$ 1,532,561 |
|||||
Allowance for loan loss activity |
||||||||||
Beginning allowance |
40,798 |
41,080 |
$ 41,343 |
$ 38,852 |
$ 38,980 |
|||||
Provision for loan losses |
2,405 |
2,833 |
5,652 |
5,196 |
5,440 |
|||||
Credit loss charge-offs: |
||||||||||
One to four family residential real estate |
893 |
547 |
483 |
1,164 |
1,135 |
|||||
Commercial real estate |
1,517 |
2,273 |
4,806 |
688 |
1,243 |
|||||
Commercial |
107 |
335 |
388 |
842 |
3,153 |
|||||
Consumer finance |
20 |
12 |
55 |
28 |
16 |
|||||
Home equity and improvement |
310 |
201 |
347 |
148 |
156 |
|||||
Total charge-offs |
2,847 |
3,368 |
6,079 |
2,870 |
5,703 |
|||||
Total recoveries |
174 |
253 |
164 |
165 |
135 |
|||||
Net charge-offs (recoveries) |
2,673 |
3,115 |
5,915 |
2,705 |
5,568 |
|||||
Ending allowance |
$ 40,530 |
$ 40,798 |
$ 41,080 |
$ 41,343 |
$ 38,852 |
|||||
Credit Quality |
||||||||||
Non-accrual loans |
$ 34,528 |
$ 40,948 |
$ 41,040 |
$ 37,377 |
$ 31,804 |
|||||
Restructured loans, accruing |
6,242 |
4,619 |
6,001 |
8,784 |
8,918 |
|||||
Total non-performing loans (1) |
40,770 |
45,567 |
47,041 |
46,161 |
40,722 |
|||||
Real estate owned (REO) |
7,388 |
9,150 |
9,591 |
11,127 |
12,735 |
|||||
Total non-performing assets (2) |
$ 48,158 |
$ 54,717 |
$ 56,632 |
$ 57,288 |
$ 53,457 |
|||||
Net charge-offs |
2,673 |
3,115 |
5,915 |
2,705 |
5,568 |
|||||
Allowance for loan losses / loans |
2.80% |
2.77% |
2.70% |
2.67% |
2.47% |
|||||
Allowance for loan losses / non-performing assets |
84.16% |
74.56% |
72.54% |
72.17% |
72.68% |
|||||
Allowance for loan losses / non-performing loans |
99.41% |
89.53% |
87.33% |
89.56% |
95.41% |
|||||
Non-performing assets / loans plus REO |
3.31% |
3.70% |
3.70% |
3.67% |
3.37% |
|||||
Non-performing assets / total assets |
2.35% |
2.65% |
2.78% |
2.81% |
2.62% |
|||||
Net charge-offs / average loans (annualized) |
0.75% |
0.85% |
1.58% |
0.70% |
1.44% |
|||||
Deposit Balances |
||||||||||
Non-interest-bearing demand deposits |
$ 225,869 |
$ 219,374 |
$ 216,699 |
$ 213,414 |
$ 190,140 |
|||||
Interest-bearing demand deposits and money market |
578,867 |
581,622 |
555,434 |
543,539 |
517,170 |
|||||
Savings deposits |
155,021 |
153,629 |
144,491 |
141,190 |
140,473 |
|||||
Retail time deposits less than $100,000 |
444,431 |
453,997 |
465,774 |
485,777 |
527,421 |
|||||
Retail time deposits greater than $100,000 |
146,655 |
150,859 |
151,258 |
161,413 |
158,069 |
|||||
National/Brokered time deposits |
22,657 |
32,565 |
41,763 |
45,315 |
47,247 |
|||||
Total deposits |
$ 1,573,500 |
$ 1,592,046 |
$ 1,575,419 |
$ 1,590,648 |
$ 1,580,520 |
|||||
(1) Non-performing loans consist of non-accrual loans that are contractually past due 90 days or more and loans that are deemed impaired. |
||||||||||
(2) Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof. |
||||||||||
Loan Delinquency Information |
||||||
First Defiance Financial Corp. |
||||||
(dollars in thousands) |
Total Balance |
Current |
30 to 89 days past due |
Non Accrual Loans |
Troubled Debt Restructuring |
|
June 30, 2011 |
||||||
One to four family residential real estate |
$ 213,034 |
$ 202,599 |
$ 3,555 |
$ 4,368 |
$ 2,512 |
|
Construction |
23,893 |
23,833 |
- |
60 |
- |
|
Commercial real estate |
735,212 |
704,613 |
7,925 |
19,404 |
3,270 |
|
Commercial |
336,598 |
326,101 |
190 |
10,307 |
- |
|
Consumer finance |
20,384 |
20,025 |
162 |
18 |
179 |
|
Home equity and improvement |
127,962 |
124,943 |
2,367 |
371 |
281 |
|
Total loans |
$ 1,457,083 |
$ 1,402,114 |
$ 14,199 |
$ 34,528 |
$ 6,242 |
|
December 31, 2010 |
||||||
One to four family residential real estate |
$ 205,938 |
$ 192,612 |
$ 2,911 |
$ 7,161 |
$ 3,254 |
|
Construction |
30,340 |
30,276 |
- |
64 |
- |
|
Commercial real estate |
767,012 |
740,230 |
2,898 |
21,737 |
2,147 |
|
Commercial |
369,959 |
356,145 |
1,982 |
11,547 |
285 |
|
Consumer finance |
22,848 |
22,551 |
283 |
14 |
- |
|
Home equity and improvement |
133,593 |
129,720 |
3,041 |
517 |
315 |
|
Total loans |
$ 1,529,690 |
$ 1,471,534 |
$ 11,115 |
$ 41,040 |
$ 6,001 |
|
June 30, 2010 |
||||||
One to four family residential real estate |
$ 217,603 |
$ 202,472 |
$ 4,790 |
$ 6,457 |
$ 3,884 |
|
Construction |
43,333 |
43,079 |
- |
254 |
- |
|
Commercial real estate |
790,521 |
763,913 |
4,057 |
17,912 |
4,639 |
|
Commercial |
364,281 |
356,500 |
508 |
6,898 |
375 |
|
Consumer finance |
28,961 |
28,767 |
177 |
17 |
- |
|
Home equity and improvement |
140,969 |
139,219 |
1,464 |
266 |
20 |
|
Total loans |
$ 1,585,668 |
$ 1,533,950 |
$ 10,996 |
$ 31,804 |
$ 8,918 |
|
SOURCE First Defiance Financial Corp.
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